He is weird often enough, but I like to keep in mind Tom McClellan's claim that there is no need for the Fed, since interest rates follow the 2-year US Treasury yield index anyway, sooner or later.
With the fun observation that when the Fed undercuts the 2-year, it ends in a speculative bubble (1996-1998, 1999-2000, 2004-2006, 2009-2019). And that when the Fed overshoots, a recession is the result (2000, 2007-2008, 2023-2024). Hence, interesting times await us...
It means that a rate hike by the Fed is on average followed by declining stock markets. The first chart on the left is standardised for a 1% rate hike, so a 1% rate hike on average leads to a 5% drop in the US stock market and a 3% drop in advanced economies ex US.
Great post! I have to study it in depth
Excellent, detailed post -- thanks very muchly.
He is weird often enough, but I like to keep in mind Tom McClellan's claim that there is no need for the Fed, since interest rates follow the 2-year US Treasury yield index anyway, sooner or later.
With the fun observation that when the Fed undercuts the 2-year, it ends in a speculative bubble (1996-1998, 1999-2000, 2004-2006, 2009-2019). And that when the Fed overshoots, a recession is the result (2000, 2007-2008, 2023-2024). Hence, interesting times await us...
Here's the chart:
https://stockcharts.com/h-sc/ui?s=$UST2Y&id=p31063381237&p=D&a=1600097283&listNum=1
What do the negative values on the x-axis of the first graph mean?
Thank you very much
It means that a rate hike by the Fed is on average followed by declining stock markets. The first chart on the left is standardised for a 1% rate hike, so a 1% rate hike on average leads to a 5% drop in the US stock market and a 3% drop in advanced economies ex US.
Clear! Thanks