The Fed Won’t Say It, but It Doesn’t Want a Strong
Stock Market
https://www.nytimes.com/2022/11/07/opinion/fed-stock-market-inflation.html
“The Fed’s policy is: ‘Get out and start looking for a job. Get off your rear end. Stop thinking the stock market is going to bail you out,’” David Rosenberg, the founder of Rosenberg Research in Toronto, said in an interview.
If Rosenberg is right, don’t expect the Fed to pause until the stock market weakens even more
My take from August 2, 2022:
Are investors right in expecting a dovish Fed pivot?
https://thehill.com/opinion/finance/3582559-are-investors-right-in-expecting-a-dovish-fed-pivot/
The problem with the recent financial market rally is that it implies an easing of financial conditions and a positive wealth effect, and neither of these developments will help the Fed in its ongoing battle to cool demand and ease inflationary pressures.
The monetary policy transmission mechanism is partly reliant on the proper functioning of the asset price channel — higher policy rates depress asset values, which in turn generate a negative wealth effect and result in a cooling down of aggregate demand. For this channel to operate effectively, the central bank must convince financial market participants that rate hikes will be sustained and that high interest rates will be maintained until monetary policy goals and objectives are achieved.
https://www.nytimes.com/2022/11/07/opinion/fed-stock-market-inflation.html
“The Fed’s policy is: ‘Get out and start looking for a job. Get off your rear end. Stop thinking the stock market is going to bail you out,’” David Rosenberg, the founder of Rosenberg Research in Toronto, said in an interview.
If Rosenberg is right, don’t expect the Fed to pause until the stock market weakens even more
My take from August 2, 2022:
Are investors right in expecting a dovish Fed pivot?
https://thehill.com/opinion/finance/3582559-are-investors-right-in-expecting-a-dovish-fed-pivot/
The problem with the recent financial market rally is that it implies an easing of financial conditions and a positive wealth effect, and neither of these developments will help the Fed in its ongoing battle to cool demand and ease inflationary pressures.
The monetary policy transmission mechanism is partly reliant on the proper functioning of the asset price channel — higher policy rates depress asset values, which in turn generate a negative wealth effect and result in a cooling down of aggregate demand. For this channel to operate effectively, the central bank must convince financial market participants that rate hikes will be sustained and that high interest rates will be maintained until monetary policy goals and objectives are achieved.