The US labor market is at its strongest point in decades, but this ‘good’ news may come at a cost. This week saw a dramatic shift in the markets, as rate-hike expectations soared and stocks tumbled in response to the latest employment report. This is a reminder of what Federal Reserve Chairman Jerome Powell had said, but the market wasn’t listening – until now.
Dennis DeBusschere, founder of 22V Research, calls the market response “extremely hawkish”. Bloomberg Intelligence Chief US Interest Rate Strategist Ira Jersey believes the data point may finally convince the market that the Fed won’t be cutting this year. This could mean a re-test of the long-end range, with the 10-year Treasury topping 3.75% again, and a re-test of 4.4% on the two-year note if 2023 rate cuts are priced out.
The shift in the markets was swift, with stocks tumbling, bond yields soaring back to pre-Powell levels, gold tumbling back to $1900, and the only thing flying high being the dollar. Jeffrey Rosenberg, a senior portfolio manager at BlackRock Inc., said on Bloomberg TV: “This is a reminder of what Powell tried to say, but the market wasn’t listening.”
The US labor market is at its strongest in decades, but this ‘good’ news may come with a cost. The markets have responded in a dramatic fashion, with stocks tumbling, bond yields soaring, gold tumbling, and the dollar flying high. This is a reminder of what Federal Reserve Chairman Jerome Powell had said, but the market wasn’t listening – until now.
Source: www.zerohedge.com