Great analysis as usual. When one looks at treasuries, would be easy to come to the conclusion to just let yields rise, prices fall, and let market forces take care of themselves. However, when you remember that hurts all current treasury holders (via lower prices), the stock market in an election year (for reasons you outlined), and increases the already burdensome interest expense for the US Gov, it makes it very likely the Fed will backstop 5% long term yields with liquidity. Doesn't seem like there is any chance of them not doing so. Which will likely continue to prop up everything. Doesn't seem sustainable to me, but I think they'll push it for as long as they can.
Thank you! Personally, I am not in favor of all the interventions that the Feds have done recently. Silicon Bank, SVB and now trying to increase liquidity via the reduction in their QT program. Unhealthy businesses need to fail and better businesses need to flourish…on the basis of market forces. I understand that inflation is high, however politics seems to be accentuating how consumers feel about prices. Inflation is not as high as it has been in worse times. But that is not the real world in which we live in :-) We have to invest/trade in the world that is in front of us. And when we take the time to track and understand how these financial markets operate, then we can even take advantage of it to grow our portfolios in the right direction 💪🏽 Cheers.
Great analysis as usual. When one looks at treasuries, would be easy to come to the conclusion to just let yields rise, prices fall, and let market forces take care of themselves. However, when you remember that hurts all current treasury holders (via lower prices), the stock market in an election year (for reasons you outlined), and increases the already burdensome interest expense for the US Gov, it makes it very likely the Fed will backstop 5% long term yields with liquidity. Doesn't seem like there is any chance of them not doing so. Which will likely continue to prop up everything. Doesn't seem sustainable to me, but I think they'll push it for as long as they can.
Thank you! Personally, I am not in favor of all the interventions that the Feds have done recently. Silicon Bank, SVB and now trying to increase liquidity via the reduction in their QT program. Unhealthy businesses need to fail and better businesses need to flourish…on the basis of market forces. I understand that inflation is high, however politics seems to be accentuating how consumers feel about prices. Inflation is not as high as it has been in worse times. But that is not the real world in which we live in :-) We have to invest/trade in the world that is in front of us. And when we take the time to track and understand how these financial markets operate, then we can even take advantage of it to grow our portfolios in the right direction 💪🏽 Cheers.