Interesting to see the Chicago Fed chart about financial conditions. Just last Friday (Dec 1) Jay Powell said that financial conditions are in restrictive territory, while the chart points to loose conditions and they are getting even looser. What do you think about this discrepancy?
Good question! I know in recent months Powell acknowledged tighter financial conditions as well. That's despite the fact that the Chicago's Fed's own gauge never enter "tighter than average" territory all throughout the Fed's tightening cycle.
My best guess is that Powell is focusing on one specific aspect of conditions which was probably the recent rise in 10-year yields (coupled with fed funds being restrictive) and the impact on housing and demand for larger ticket items. But even longer-dates yields have dropped sharply from their highs when he made the most recent comment, so hard to know.
This is honestly, one of the most insightful and powerful multi-dimensional macro + technical + sentiment post that truly help you with perspective building. Definitely worth a read!!
Great post! Thanks for your hard work :)
Appreciate the feedback...glad you enjoyed it!
Interesting to see the Chicago Fed chart about financial conditions. Just last Friday (Dec 1) Jay Powell said that financial conditions are in restrictive territory, while the chart points to loose conditions and they are getting even looser. What do you think about this discrepancy?
Good question! I know in recent months Powell acknowledged tighter financial conditions as well. That's despite the fact that the Chicago's Fed's own gauge never enter "tighter than average" territory all throughout the Fed's tightening cycle.
My best guess is that Powell is focusing on one specific aspect of conditions which was probably the recent rise in 10-year yields (coupled with fed funds being restrictive) and the impact on housing and demand for larger ticket items. But even longer-dates yields have dropped sharply from their highs when he made the most recent comment, so hard to know.
This is honestly, one of the most insightful and powerful multi-dimensional macro + technical + sentiment post that truly help you with perspective building. Definitely worth a read!!
Thanks Amrita! I love trying to connect the dots between the macro narrative and what the market's doing under the hood. Thanks for recommending!