The next move is likely “up”, and perhaps very aggressively. Let me get that out of the way first, but do not let that fool you. We have a real problem. The problem lies within the Fed and them not taking action sooner, and now find themselves in a state of impotence. With CPI at 7% and oil and gas prices on a steep incline, the Fed has no choice but to follow through with the full taper and at least 1 rate hike. The caveat here with regards to rate hikes effectively staving off higher oil and gas prices is …. *drumroll* …. war with Russia. Our president on Wednesday essentially “Greenlighted” a Russian incursion….don’t believe me, rollback the tape. Sec. Blinken meets in Geneva with Russia, at which Russia will make demands, we won’t comply and we could be on the brink of a major conflict because of it. The Fed will stay their course until interest rates once again collapse, and if you’re not buying that, I don’t care – this is how it happens – the bond market knows, and it’s of our assessment the short end of the curve has or is very close to fully pricing in current Fed policy . So by the time the Fed lifts off with its first rate hike in March, I fully expect yields to be moving backwards by then. That’s it, that’s the real.
Yesterday we saw our 3rd weekly increase in US Jobless Claims, so we’ll be keeping a watchful eye on the Jan employment data come early Feb. – and so will the Fed.
Next Wed: FOMC Policy Meeting
That’s all I’ve got today, we’ve given adequate warnings of Scenario 4 enough – now it’s playing out – Commodities are likely the next shoe to drop.