This is that time of the year for big turkeys, cranberries, wine, garland, gingerbread, Christmas trees, presents and many more. Especially for the Americans. All traditions have a sweet story behind them. This year, in general, has been a very good one. We all have reasons to be much thankful.
Powell’s renomination was a smart move. It removed the uncertainty and any surprises the ultra-progressive group in the administration could force the Fed that could remain ‘easier for longer’ with the idea that a Brainard-led Fed would be more inclined to go along with the White House agenda for Fed policymaking. It was also a smart move to appoint Brainard as Fed Vice-Chairman as you couldn’t find a more dovish person within the Fed than her. She is a good balance for Powell in case he turned too hawkish.
No doubt, interest rates have been suppressed by the Fed, and the Fed knowingly laid out a timeline and plan for ending the emergency level monetary policies. The latest minutes of the Fed’s meeting alludes that they may be even compelled to move faster than they have publicly communicated.
This means an end to the asset purchases, maybe sooner than June of next year, like Mar 2022. For this reason, some Fed members could be out doing some media interviews to start setting expectations for a more aggressive timeline for rate hikes.
While the Fed continues to maintain their line on ‘transitory inflation’, they are also equally cognisant of consumer behavior. Finally, consumer views dictate the markets. Currently, prices are up and sentiment is down. Finally, consumers will vote with their pockets.
Therefore a faster path to normalizing rates that will stabilize prices and sentiment will be good for all. In such an environment the rest of the year should do well for the stock markets too.
Happy Thanksgiving to all of you!
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Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund. Currently, he is setting up a hedge fund where foreign citizens can invest in Indian growth stocks like Tanla operating in hyper-growth markets like CPaaS.