Back in January, when Chair Powell unexpectedly U-turned on months of hawkish policy and shocked traders when he said that contrary to what he had said just two weeks prior during the December FOMC press conference, the Fed could be “patient”, rate hikes could “pause”, and the Fed’s balance sheet reduction is not in fact on “autopilot”, the Powell Put finally emerged for the first time, and the result has been a torrid rally ever since, and the best first half market performance in decades.
It also prompted an avalanche of accusations that Powell – who has also facing intense pressure from president Trump to cut rates or else lose his job – folded like a cheap suit, held hostage by traders who pushed stocks low enough to i) test where the Powell Put strike price is and ii) force the Fed to not only halt rate hikes, but launch an easing cycle, something it has now effectively done.
Yet as we noted in January, being held hostage, or captive, by the market is nothing new to Powell; in fact, it was way back when in March 2013, ahead of the Fed’s taper announcement, that the Fed chair first realized that it was not the Fed that controls the market, but rather – after years of ZIRP and QE – the Fed had become a hostage of the market’s every whim.
And now, none other than the world’s biggest incubator of central bankers, Goldman admits as much….
Oh puhleeze can we dispense with the ridiculous notion that the fed is in over its head? It has steered us to the very edge of the cliff with two tires in mid-air and now it throws up its arms and pleads innocence. It’s true that it can’t back up even if it wanted to but the point is that they need to create an appearance that they’re not culpable for driving us to the edge, so they can continue in power after the collapse, which after all is when the fed’s shareholders can snap up real assets with their fake money, as they did in the great ripoff.
This is an IQ test for the american people.