If BlackRock And Pimco Are Right, “Another Fed Shock Looms”
by Tyler Durden
ZeroHedge.com
Jun 22, 2017
Discussing the market’s ongoing reaction to the schizophrenic split between the hawkish Fed and a market which now sees a 50% lower terminal Fed Funds rate than the FOMC, yesterday Jeff Gundlach said that the flattening yield curve could become a concern for US economic growth when two and three-year notes yield about the same.
“Lower CPI in the next couple of months will be a cold bucket of water for the Fed tightening dreams,” Gundlach said. “Commodities are super weak, with the dollar down year-to-date, no less.”
In not so many words, an error is forming: either “policy error” by the Fed, or one by the market, which will be forced to reconcile its dovish stance, potentially in violent fashion, with the Fed’s relentless “data independence.”
It was this issue that was the topic of a note by Bloomberg’s macro commentator Garfield Reynolds, who noted in his overnight Macro View note, that in addition to the Gundlach “quandary”, if recent commentary by BlackRock and Pimco is right, then “another Fed shock looms.”
His full note below:
Another Fed Shock Looms If BlackRock, Pimco Right: Macro View
Once bitten, twice eager sounds like a contradiction but it can often seem like standard operating procedure in global markets – just look at the money piling into bets that the Federal Reserve is going nowhere soon with monetary tightening. It’s as if the February shock – when a deluge of Fedspeak made traders realize their bets against a March hike were wrong – never happened.
Even after Fed Chair Janet Yellen made it clear she anticipates further rate increases, the “policy error” narrative is going full bore. Eurodollar options and fed funds futures signal no more moves for at least three months and no more than one more this year.
The Rest…HERE
