The Fed kept its level of asset purchasing unchanged because it was worried about the level/trajectory of growth and inflation.
Ironically, but not surprisingly, the effect, from a market perspective, has been the opposite of that intended.
Inflation expectations have rolled over, slow growth exposure has outperformed and pro-growth leverage has been marked lower alongside treasury yields, the yield spread and the dollar.
No particularly groundbreaking analysis here, just a quick visual illustrating the market vote on the Feds decision.
Perhaps the Pavlovian response to stimulus policy has officially faded and consensus is coming around to the point we’ve been harping on all year: #StrongDollar + #RatesRising both reflects and helps perpetuate sustainable real growth, and vice versa. The graphic below, unfortunately, reflects the “vice versa”.
- Hedgeye Macro