As a seasoned investor with over three decades of experience in commodities trading and navigating various financial markets, I find myself increasingly concerned about the current state of affairs, particularly with regards to the Federal Reserve’s handling of inflation and interest rates. The disconnect between the Fed’s policy actions and market reactions is staggering, akin to watching a game of Jenga where each move threatens to bring down the entire edifice.
Noted commodities dealer Peter Brandt recently posted a series of tweets from The Kobeissi Letter, a resource known for its insightful analysis and commentary on significant happenings within the global financial market.
The Kobeissi Letter revealed a major development regarding the Federal Reserve’s recent actions regarding managing inflation, and interest rates in particular. It says that, basically, now we are witnessing “the biggest market to Fed disconnect in history.”
Famous trader Brandt offered a strong criticism towards the Federal Reserve and its chair, Jerome Powell, in response to the ongoing discussion.
Peter Brandt tweeted: “The Federal Reserve, its chair, and their guidance on future actions will be remembered in history due to their missteps.
The Fed and its feeble chair and its forward guidance will go down into history for its fumbles
— Peter Brandt (@PeterLBrandt) December 27, 2024
US inflation keeps growing
In the discussion titled “The Kobeissi Letter,” the author points out an apparent mismatch they’ve noticed: The reactions of financial markets seem to contradict the policies implemented by the Federal Reserve in recent times.
As an analyst, I’m observing a significant development: The yield on 10-year U.S. Treasury notes has climbed by 100 basis points since the Federal Reserve’s policy shift, or ‘Fed pivot,’ commenced in September. This means that the interest rates for these bonds, which aid the U.S. government in borrowing funds, thereby expanding the national debt, have noticeably risen.
The treasury yields are currently at the highest level since May this year, despite the Fed aggressively cutting down interest rates. One of the side effects here, according to Kobeissi, is the impact on the housing market: “Buying the median priced home at $420,400 now costs an average of ~$400 more PER MONTH.”
A primary factor leading to increased interest rates, even as the Federal Reserve reduces them, is the understanding within financial markets that inflation is once again becoming more prevalent.
Bitcoin reacts to Jerome Powell’s recent announcement
In December, the leading global cryptocurrency, Bitcoin, dropped under the previous $100,000 mark. This sudden price decrease occurred following a statement by Jerome Powell, the chairman of the Federal Reserve, indicating that they plan to reinstitute a stricter monetary policy in the coming year.
This indication suggested to the markets that there could be an inclination towards increased interest rates, implying reduced market liquidity and potentially decreased investment in riskier assets like Bitcoin and gold specifically.
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2024-12-27 17:24