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Bulls, Bears and the Pivot - As Binary As It Gets

 Whether the Fed has to reverse to easier monetary policy in the next few months is the big question. 

Everywhere you look, choices are contingent on that central call of whether the Fed has to reverse.

Investors expect the world to be in recession a year from now; the US unemployment rate to be higher; and Global monetary conditions to be tighter. These parameters do not spell soft landing.

The contradiction is resolved to an extent by a belief that bad news is good — that the economy will be slow enough to push the Fed into reversing course early and starting to cut rates. In such circumstances, markets can prosper despite a poor economy. 

The critical issue is how long (RE: and how high) rates keep rising, and when they start falling.

John Authers Bloomberg 19 september 2022


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