The bulls have two bullets in the chamber.
1. Trump-China trade talks ahead of G20
2. Possibility of Fed pausing
Looks like we might start to hear more of this, neutral policy shit, from the Fed.
“As you move in the range of policy that by some estimates is close to neutral, then with the economy doing well it’s appropriate to sort of shift the emphasis toward being more data dependent,” Clarida said during a “Squawk Box” interview.
He spoke at a time when the markets are watching Fed speakers closely for what happens next with rates. Fed Chairman Jerome Powell helped stoke market volatility in mid-October when he said the central bank remains “a long way” from neutral, an indication that it would be more aggressive with policy than investors had anticipated.
With his comments Friday, Clarida becomes the second central banker in as many days to suggest that neutral isn’t so far away. Atlanta Fed President Raphael Bostic, in a speech delivered in Barcelona, said Thursday that the federal funds rate is “not too far” from neutral.
Clarida noted that the most recent projections from Federal Open Market Committee members indicate that the long-run funds rate projection is 3 percent. The current funds rate target range is 2 percent to 2.25 percent, with markets widely expecting the FOMC to approve another quarter-point increase in December.
“I think being at neutral would make sense,” he said.
These headlines are, arguably, designed to manipulate investor psyche and soften the decline. If in fact the economy is slowing, we will not enjoy a bull market. We’ll get back into the disarray endured in 2014-2016, where selective stocks went up and the earnings season was littered with dead bodies post reporting rancid numbers. If the economy is slowing, mind you, these levels will not hold and we’re likely to fall by another 10% before reassessing.If you enjoy the content at iBankCoin, please follow us on Twitter