97.0 Taper (but no) Tantrum! Why not?

———Ep 97.0 Summary———
Jay Powell announced his central bank is satisfied (enough) with the economy’s direction. Thus, the Fed will soon be ‘tapering’; lessening the ‘monetary stimulus’. What did bond-money markets say? Did they have a tantrum? No, because they don’t believe what Jay believes.

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———Ep 97.0 Topics———

00:00 Intro: Jay Powell announced it anticipates its purchases of US Treasury bonds will slow.
00:38 Financial press puts the Federal Reserve upon a pedestal of omnipotence, competence.
03:19 A previous Fed “taper”, in 2013, resulted in a so-called tantrum. But was it, really?
08:03 Knut Wicksell told us 114 years ago that rising interest rates signal a healthy economy.
10:24 Markets are not considered reliable leading indicators by technocrats at the Fed.
13:14 Leading market indicators include: sovereign bonds, eurodollar futures, the US dollar.
14:47 In mid-August it was clear there would be no tantrum if there ever was a taper.
18:06 Fed officials demurred to define what maximum employment is last year, but now…
20:01 (Fed officials believe that inflation surges are and will be transitory; so does Jeff).
20:51 …but now, Fed officials believe maximum employment is within sight; achievable.
22:24 Maximum employment will be considered only after Fed inflationary targets are achieved.
25:32 The US labor force participation rate may not return to pre-pandemic conditions.
29:39 The US unemployment rate has detached itself from the US participation rate.
32:21 Mainstream expectations were for rising US Treasury yields after the Fed’s taper news.
38:20 Bond yields did not rise after the taper announcement — no tantrum.
40:28 US debt ceiling deadlines (2011, 2013, 217) caused/correlated with monetary turbulence.

———Ep 97.0 References———

Tapering The Truth: https://bit.ly/38oyvcW
Taper *Without* Tantrum: https://bit.ly/38sdMVH
The Fed’s True Love: He Tapers Me, He Tapers Me Not: https://bit.ly/3yrOaCT
As Fed Focuses on Taper, It’s About To Get (a lot?) More Interesting In Bills: https://bit.ly/38n2Sk8
Alhambra Investments Blog: https://bit.ly/2VIC2wWlin
RealClear Markets Essays: https://bit.ly/38tL5a7

———Who———

Jeff Snider, Head of Global Investment Research for Alhambra Investments and Emil Kalinowski.  Art by Terrence in Australia.  Podcast intro/outro is “1AM OMW” by Ballpoint from Epidemic Sound.