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DesmondMilesDant OP t1_j9dovnj wrote

Reply to comment by KutteKiZindagi in Wall Street Newsletter S02E07 : Why is there such a disconnect b/w Stock and Bond market? by DesmondMilesDant

Yah i get it. But i also know we had the 2nd greatest wipe out of all time in the past decade. The first one happened when rates were at 0%. So from my pt of view i don't really see another one coming.

As for your arguments about 2005-08 times. If you look back at those times the PE ratio were basically trading at 16-18. Then Fed cut rates in 07 and PE skyrocketed but so did the equity risk premia and therefore market had already topped out in 2007 and we got the "Fed pivot" crash. The time around we are already there at 18-19 PE levels. We just need Fed to cut rates and blow up the Erp. But Fed aint doing that coz it thinks job market is still strong and inflation is sticky. So they will hold those rates. Meaning a low PE will meet a low EPS somewhere down the line and then Fed will be forced to pivot. But i think it will be too late by then. The damage will be more severe by 2024.

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Theta_Ome t1_j9dqgs3 wrote

>Fed aint doing that coz it thinks job market is still strong and inflation is sticky

I'm not trying to hound you but I think you might be missing a piece of information.

Powell gave an interview shortly after his last FOMC speech. They had new numbers come out and he was talking at some event.

What he said was that they didn't think there was a wage/price spiral anymore, they didn't think inflation was sticky anymore, because they had not taken into account the border closure preventing immigrant workers getting in (I think there was an unspoken 'illegal labor' implication here, but that's not the point really).

And he was VERY chipper about it but said they would keep an eye on the numbers.
I'm curious if you saw this interview of his or if you perhaps missed this (there is so much info out there, it's easy to miss)

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