On today’s episode of “On the Margin,” former senior Federal Reserve trader Joseph Wang joins the show for a discussion on quantitative tightening. Citing Joseph's most recent piece "Turbo Tightening", Mike and Joseph walk listeners through the monetary mechanics driving the Fed's balance sheet, the $2 Trillion at the reverse repo & discuss what this means for markets, specifically risk assets.
As the Fed begins it's QT program, Joseph shares the scenarios which could lead to both a soft & hard landing for the Fed. As Lacy Hunt also recently pointed out "Since the Fed's founding in 1913, monetary tightening has resulted in hard landings in all but about 10 % of the cases. Some of the soft landings avoided a U.S. recession but still caused a financial crisis."
Finally, Joseph shares his outlook for equities, bonds, inflation and risk assets highlighting that there is "A lot more pain to come". This is a conversation you can't afford to miss, to hear Joseph's thoughts, you'll have to tune in!
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Referenced In The Show:
Turbo Tightening: https://fedguy.com/turbo-tightening/
Charlie Rose: Sir James Goldsmith Interview - 15.11.94: https://www.youtube.com/watch?v=wwmOkaKh3-s
Fed Governor Christopher Waller says he's prepared to take rates past 'neutral' to fight inflation: https://www.cnbc.com/2022/05/30/fed-governor-christopher-waller-says-hes...
Monetary policy normalization in the euro area: https://www.ecb.europa.eu/press/blog/date/2022/html/ecb.blog220523~1f44a...
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Timestamps:
00:00・Introduction
00:50・Quantitative Tightening
08:07・Soft Landing For Quantitative Tightening
13:05・Hard Landing For Quantitative Tightening
21:21・"A lot More Pain To Come" For Risk Assets
28:41・Fireblocks Ad
29:58・Raising Rates To Destroy The Wealth Effect
37:40・Treasury Market Liquidity
42:01・The End Game For The QE Era
45:32・De-Globalization
47:14・Expect a 30% Correction In Stocks
50:47・Will Something Break & Powell Be Forced To Pivot?
Listen to this episode on Apple or Spotify.
Apple: https://tinyurl.com/mry8y4k3
Spotify: https://tinyurl.com/3vnnkrkw
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Disclaimer: Nothing discussed on On The Margin should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.
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