FAST FIVE: The Fed's Second Act Problem

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#3: How FOMC decisions affect stock prices, the real-world problem that matters most to us.

Over this period the index rose by 270%, and most of those gains happened the before, the day of, and the day after a Fed meeting.

Ten-year TIPS, for example, currently yield -1.0% and the implied inflation breakeven is 1.6%, right where it was pre-COVID.

Bottom line: with fiscal stimulus likely off the table through the November elections, the Fed knows it is alone in carrying the Act Two narrative forward for now.

Sources: NY Fed Weekly Economic Index, which does show some recent improvement in the US economy: NY Federal Reserve “Fed Drift” Paper (2018, with 2011's analysis included): The Fed's 2020 Markups to Its “Longer Run Goals” Statement, where it deletes mentions of the SEP: Fed Balance Sheet (flat since June):

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