The Markets Will Soon Demand The Fed Pause The Taper
0The Markets Will Soon Demand The Fed Pause The Taper Well, the FOMC meeting has come and gone and not only lived up to expectations but exceeded them. The Fed said it would accelerate the taper, while the dot plot was much more hawkish than anticipated based on the Fed Funds futures for 2022. A faster taper will tighten financial conditions even further when the global economy is slowing and earnings growth is ready to fall off a cliff, with stock valuations at historically high levels. The only reason the SP 500 rallied so sharply after the Fed meeting was because as soon as the press release hit the newswire, the VIX index began pushing lower, creating a sharp decline in implied volatility. Measurements such as the iShares 7-10 Yr. Treasury Bond ETF to iShares Investment Grade Corporate Bond ETF ratio have risen to its highest levels since May while the IEF to iShares High Yield Corporate Bond ETF ratio has also climbed this week. Falling rates, flattening curves, declining inflation expectations are screaming of a bond market that says the Fed is too late and that they are behind the curve and the damage to the economy has been done.