4 ms·

Good, but asset values are still near historical high valuations. The Fed plan isn't to just tame inflation but reduce employment to slow wage increases, rever

Good, but asset values are still near historical high valuations. The Fed plan isn't to just tame inflation but reduce employment to slow wage increases, reverse asset gains with "higher for longer", and restore credibility. Get comfortable. Still a long way to go before that pivot.

makestuff 4y ago
Typically the asset crash happens after the fed pivots. Obviously correlation != causation, but just because inflation is coming down doesn't mean assets won't follow soon.
- bequanna 4y ago
  IMO the Fed is trying very hard to regain credibility after the overblown stimulus and terribly delayed response to the resulting inflation. These are two very public failures. Everyone is expecting a quick pivot which is why I think that is exactly what will not happen. Many people are making foolish purchases now at inflated asset prices and high interest rates because they expect that they will be able to refinance at lower rates in a year or so. What if they can't? Once the general public starts to realize what "higher for longer" actually means we will (hopefully) have a huge sentiment shift to the downside with corresponding asset price corrections.
JumpCrisscross 4y ago
> Fed plan isn't to just tame inflation but reduce employment to slow wage increases, reverse asset gains with "higher for longer" No, the Fed’s plan is to tame inflation. If Powell can do that while maintaining strong employment, he’ll go down in history as a legend. Nobody wants unemployment to go up or asset prices to go down.
- bequanna 4y ago
  Overly strong employment isn't necessarily ideal. We could have official 0% unemployment by just paying people to stay home. Labor shortages and unchecked wage growth supports inflation.
  - JumpCrisscross 4y ago
    > strong employment isn't necessarily ideal Sure, but if it doesn’t cause inflation it isn’t the Fed’s problem. In theory, it’s tough to square a tight labor market with moderate price levels. But we’re seeing a strange resilience in hiring as tech’s bubble projects and their employees absorb the bulk of the pain.

makestuff 4y ago

Typically the asset crash happens after the fed pivots. Obviously correlation != causation, but just because inflation is coming down doesn't mean assets won't follow soon.

bequanna 4y ago
IMO the Fed is trying very hard to regain credibility after the overblown stimulus and terribly delayed response to the resulting inflation. These are two very public failures. Everyone is expecting a quick pivot which is why I think that is exactly what will not happen. Many people are making foolish purchases now at inflated asset prices and high interest rates because they expect that they will be able to refinance at lower rates in a year or so. What if they can't? Once the general public starts to realize what "higher for longer" actually means we will (hopefully) have a huge sentiment shift to the downside with corresponding asset price corrections.

JumpCrisscross 4y ago

> Fed plan isn't to just tame inflation but reduce employment to slow wage increases, reverse asset gains with "higher for longer" No, the Fed’s plan is to tame inflation. If Powell can do that while maintaining strong employment, he’ll go down in history as a legend. Nobody wants unemployment to go up or asset prices to go down.

bequanna 4y ago
Overly strong employment isn't necessarily ideal. We could have official 0% unemployment by just paying people to stay home. Labor shortages and unchecked wage growth supports inflation.
- JumpCrisscross 4y ago
  > strong employment isn't necessarily ideal Sure, but if it doesn’t cause inflation it isn’t the Fed’s problem. In theory, it’s tough to square a tight labor market with moderate price levels. But we’re seeing a strange resilience in hiring as tech’s bubble projects and their employees absorb the bulk of the pain.