Today, Fed chair Powell will try to appease political pressure to “do something!” about inflation caused by supply-side shocks (which are already resolving themselves) and asset markets loco on the irrational belief that central banks won’t let asset bubbles burst.  Sure thing!  Of course, the policy mistakes were already made in not tightening financial conditions appropriately during the expansionary phases and speculative manias of the last two decades.

Now, as expectations for Fed tightening accelerate, the risk-trade is tumbling (stocks, corporate debt, commodities, cryptocurrencies, and yes, even real estate is in this group). At the same time, Treasury bonds keep gaining on slower and slower growth prospects for 2022.  A new sheriff’s in town, and it’s called mean-reversion.  Global liquidity is retreating amid a consumer-led economic slowdown with market participants never more long or leveraged.  Perfect storm indeed.

The Economic Cycle Research Institute’s Lakshman Achuthan warns consumer spending is in a cyclical slowdown, and it will weigh on holiday sales. Here is a direct video link.