Tweet

This Thread may be Removed Anytime!

Twitter may remove this content at anytime! Save it as PDF for later use!

More from @NorthmanTrader

Sven Henrich

@NorthmanTrader

Feb 26

NorthCast Market Update: Decision Time

$SPX

For those preferring YouTube I posted the clip there as well:

Dollar reversing off of upper pattern trend line.
Context on top of thread.

$DXY

Read 4 tweets

Sven Henrich

@NorthmanTrader

Feb 25

Interest on debt goes: Weeeeeeeee....

Larger than the entire yearly US military budget now.

But let's keep raising rates while peddling a soft landing narrative.

Best of luck with those debt ceiling discussions.

Btw: The ceiling "debate" is a farce anyways and they can't cut enough to keep up with this funding fire that's burning all around them.

The deficit will increase massively before a recession even hits & hence even more debt is required at higher rates.

This is a math doom loop brought about by 14 years of cheap money & reckless spending by both parties.

Read 5 tweets

Sven Henrich

@NorthmanTrader

Feb 24

Keeping raising rates without knowing the lag effects while continuously selling a soft landing narrative which encourages risk taking countering the inflation fight has to be one of the most boneheaded policy communication strategies ever.

If people buy into the soft landing narrative the Fed keeps selling why wouldn't they pile into stocks?
Thereby resulting in optimism and rising wealth effect and more spending leading for inflation to remain stickier requiring more rate hikes.
It's just so dumb.

And this is how a delayed recession ends up being a worse recession once the lag effects kick in in full.
And then the Fed ends up panic cutting rates and millions lose their jobs.

It's not like we've haven't seen this movie before.
That's literally the same script from 2007:

Read 4 tweets

Sven Henrich

@NorthmanTrader

Feb 22

Reminder: The lag effects of the rate hikes of last 6 months won't fully manifest themselves in the economy until later this spring and summer.
Whatever you're seeing now is not reflective of what is to come. Hence they're called lag effects.

And everyone that drones on about soft landing or no landing is flying blind because they haven't seen the impact of the lag effects yet either.
Will they be right? Maybe. But it's entirely unproven at this point.

But historically it gives markets still a theoretical runway to rally in the meantime. But when the lag effects hit everything can change on a dime.
And yield curves sharply steepening following the un-inversion is the traditional sign.

Read 5 tweets

Sven Henrich

@NorthmanTrader

Feb 19

Why should the stock market take the Fed seriously if it keeps peddling a soft landing narrative?
The Fed is practically feeding the animal spirits bringing about loosening fin conditions which goes against slowing the economy to bring inflation down.

bloomberg.com/news/articles/…

All the hawkish talk means nothing if you in the same breath keep telling people nothing bad is going to happen.

And if people start believing nothing bad is going to happen why wouldn't they pile back into stocks?

This have your cake and eat it too communications strategy by the Fed is self defeating.
Hence it was so baffling when Powell insisted on fin conditions having tightened when they actually have loosened.

Read 4 tweets

Sven Henrich

@NorthmanTrader

Feb 16

As of last night the Chicago Fed national financial conditions index shows financial conditions as loose as they were on February 25, 2022 a year ago.
Conditions never even got to restrictive.

It all peaked in October, hence the lift in risk assets across the board since.

No really. If you view market direction through the lens of financial conditions then all you're seeing makes perfect sense. It has nothing to do with valuations, earnings, Fed jawboning, etc.. Financial conditions tighten markets go down, they loosen markets go up.

so if you're looking for evidence that the Fed is running a restrictive monetary policy it is not evident, certainly not in market behavior which is again in risk on multiple expansion mode.
Powell is no Volcker. Not even close.

Read 4 tweets

Share this page!

Sven Henrich

People who liked this thread also liked...

Try unrolling a thread yourself!

More from @NorthmanTrader

Sven Henrich

Sven Henrich

Sven Henrich

Sven Henrich

Sven Henrich

Sven Henrich

Did Thread Reader help you today?

Don't want to be a Premium member but still want to support us?

Send Email!