Takeaway: If the Fed does incrementally ease monetary policy today, it will be a meaningful step forward in the Fed’s policy to debase the US dollar.



  • Long-term inflation expectations are significantly higher than they’ve been at previous iterations of QE/OpTwist.
  • As a result, if the Fed does incrementally ease monetary policy today, it will be a meaningful step forward in the Fed’s policy to debase the US dollar.


As we outlined in a research note Monday titled, “CHINA REMINDS US THAT GROWTH SLOWS AS INFLATION ACCELERATES”:


“… if the Fed announces QE3 on Thursday, the action would be a meaningful step forward in the Fed’s aggression towards achieving its mandates, based upon how elevated domestic inflation expectations are relative to previous iterations of QE/OpTwist.”


Looking to the charts of US 5yr and 10yr breakeven rates (TIPS), long-term domestic inflation expectations are particularly elevated – especially relative to where they’ve been at previous announcements of QE/OpTwist. As a result, any new LSAP policy announcement today out of the Federal Reserve would be a rather aggressive step forward in its pursuit of a lower USD and higher inflation. Never forget that Bernanke, a student of the Great Depression, remains quite fearful of the specter of deflation and could be ready to step up his efforts to avoid it.




Lastly, we’ve outlined in recent notes clear winners and losers from the Fed’s Policies To Inflate:



Best of luck out there,


Darius Dale

Senior Analyst

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more