Two weeks after BofA’s Michael Hartnett previewed (and timed) not only the “Great Fall” of stocks, but also explained that the Fed and global central banks are now in the business of making the “rich poorer“, he is out with a new note which looks at the Fed’s latest U-turn, which has unleashed the latest market buying spree, warning that “further upside in risk assets will create problems later in the year” (for three reasons he lists out), and concludes that “ultimately, we believe the extremely strong performance by equities and bonds in H1 is very unlikely to be repeated in H2.” Hartnett then goes back to his original thesis that the Fed will no longer pursue its primary mandate of pushing stocks (i.e. wealth effect and confidence) higher because it is “now politically unacceptable for the Fed and any other central bank to stoke a bubble on Wall St.”
As a result, “monetary policy will have to tighten to raise volatility, reduce Wall St inflation, and reduce inequality. There are two ways to cure inequality: you can make the poor richer, or you can make the rich poorer. The Fed will reduce its balance sheet in the hope of making Wall St poorer.”
This post was published at Zero Hedge on Jul 13, 2017.
Follow on Twitter
Recent Comments