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The Fed’s Kryptonite
Last November in Blue Wave I wrote: “The coming stimulus isn’t a panacea! It means massive deficits will persist. They will require higher taxes and incredible amounts of US Treasury issuance. Higher TAXES and rising LONG-YIELDS (all else equal) are the price for stimulus. The former drags on growth and earnings while the latter will require a Fed response that occupies its balance sheet. If the Fed does not act, higher yields will derail risk assets, just as they did at the end of 2018.” For months, I’ve written that equity market participants have been ignoring the possible tradeoffs that come with massive ... (full story)