Fed head Janet Yellen spoke at Harvard University on Friday and supplied her latest thinking on Fed policy.
“It’s appropriate, and I’ve said this in the past I think, for the Fed to gradually and cautiously increase our overnight interest rate over time, and probably in the coming months such a move would be appropriate," Yellen said.
Here's analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers this morning.
"Friday’s Yellen QA @Harvard was easily her most hawkish of the year – she said she’s “probably” going to raise in June or July based on her forecast. Since her forecast has always been the risk, there’s not a lot I can own into her making another policy mistake (tightening into a slow-down like she did in DEC); hence my sell signals in Treasuries, Utes, etc. Friday."
Look at the falling 10-year Treasury yield despite the Fed's December rate hike:
Meanwhile in commodities...
"Copper is down -0.6% this morning => Dollar Up, Rates Up deflates the “reflation” – Gold gets this too. Come June/July I can’t see why markets won’t look like they did by the end of DEC and through JAN. If you have Hedgeye’s GDP and profit cycle forecasts (Q2 will be the worst – Q1 was not the “bottom”), you might have our view of 1-3 month risk here."
As for Gold...
The risk to macro markets is that Janet Yellen makes her second rate hike mistake.
Remember Yellen is a labor economist so ahead of Friday's non-farm payroll report, here's her favorite labor market indicator. Note: It's deteriorated for the fourth straight month: