Growing Support within Fed to Announce Tapering in September

[bobandsherry]

After further review, inflation may be hotter than expected.... will be interesting to see how markets react. More interesting to see how Fed manages this and what they say or insinuate come Jackson Hole meeting.

https://www.cnbc.com/2021/08/16/the...-tapering-of-bond-purchases-in-september.html

 

[Montecfo]

It's a fascinating topic. I do not now expect a taper to be announced in September, but the decision I think turns on economic data between now and then. Jackson Hole will offer clues.

I am positioning for somewhat higher rates

 

[njhowie]

We've seen this movie before and know how it ends. Should the Fed make such an announcement, volatility in the stock market will escalate, and then Fed will back down. In all likelihood, come September, Powell will have a reason ready to go as to why it's not yet the right time to do it.

The Fed has to keep doing what it's doing, and even bigger going forward if they want to keep the status quo.

My view is that things are so messed up, no matter what the Fed does, the past two decades of malfeasance they've been practicing is going to catch up. The longer they keep up the charade, the nearer we get to doomsday.

Further, I've been unwavering in my opinion that Powell is going to be replaced come February. In the interim, he isn't going to do anything to rock the boat. He's going to go out quietly, claim success during his tenure, get his next gig at Goldman, JPM, or some other big name firm, and leave the growing pile of dung for his successor...who will likely be Brainard, for a number of reasons.

 

[Lsbcal]

I cannot imagine how any here will get ahead of this type of approaching news. So is it all down to guessing? Is anyone here planning on acting on their guesses?

FWIW, I've had my fixed income in short term investment grade for some time now.

 

[Sojourner]

I cannot imagine how any here will get ahead of this type of approaching news. So is it all down to guessing? Is anyone here planning on acting on their guesses?

+1

I don't really have any guesses, and I don't plan on making any changes to my AA or my short-term investments. There are undoubtedly some out there who will make certain moves around this that turn out to be profitable, based on educated guesses or other market expertise, but I am definitely not one of them.

 

[triangle]

Even after tapering begins, won't a lot still be added to the balance sheet, since it is a deceleration and not a stop. Continuing to support the TINA to stock narrative even if there is a modest increase in rates? But as near term inflation continues, potential tax increase looms, covid redux, highly valued stock market (doubled in 15 months), .... there is a lot to cause doubts in the financial markets.

 

[njhowie]

In all likelihood, come September, Powell will have a reason ready to go as to why it's not yet the right time to do it.

Powell just gave a talk and did exactly this - beginning to prime the pump as to what he's going to do...keep rates where they are...certainly not raise them. He's going to continue "watching" for the next 6 months with his feet up on the desk.

“We're not simply going back to the economy that we had before the pandemic,” Powell said at a Fed virtual town hall for educators and students. “We need to watch carefully as the economy continues to get through the pandemic and try to understand the ways that the economy has changed and what the implications are for our policy.”

 

[tulak]

Buy S&P 500 puts?

That’d be one way to protect against any downturn, but I’m skeptical the Fed won’t back off if the market drops.

I watched an interesting Frontline a couple of weeks ago about the Fed. Nothing really shocking for those that have paid attention since 2008. Basically, they’re in deep and it’s going to be hard for them to get out.

It’ll be interesting to see how this plays out.

I’m not making any changes, but I’m going to check out the cost of puts out of curiosity.

 

[DrRoy]

They tapered before, the market had its 'tantrum', and then it got over it.

 

[njhowie]

They tapered before, the market had its 'tantrum', and then it got over it.

...because the Fed reversed itself - lowering rates lower than ever and increasing purchases more than ever.

 

[Montecfo]

Even after tapering begins, won't a lot still be added to the balance sheet, since it is a deceleration and not a stop. Continuing to support the TINA to stock narrative even if there is a modest increase in rates? But as near term inflation continues, potential tax increase looms, covid redux, highly valued stock market (doubled in 15 months), .... there is a lot to cause doubts in the financial markets.

The balance sheet will expand yes, but markets will view that the Fed has begun to "tighten".

Change and its direction are the most important elements.