We get a few days of calm and it begins to feel kind of ‘boring’ and we love boring, but with all the crosscurrents in the global economic markets, whether it be tariff talk or quantitative tightening we are certain wild times will return soon.
The tariff talk to us is just that–talk. It may be good or bad, but no one knows so instead of talking facts we just listen to the talking heads spouting off to either fill the business TV day or even the folks on the evening news. The news folks ask stock brokers, the janitor, and the guy next door their opinion of the tariff–everyone is an an expert except us–we know little about it as a FACTUAL matter.
Quantitative tightening is something we can see before our very eyes. We can look at what the Fed is doing based upon information they release. Right here you can see that the Fed let $26 billion run off of the balance sheet. (You need to set the chart at 3 months to see the recent detail). This is $26 billion of less demand for debt–in 1 month. We are quite convinced that this puts a floor under interest rates. This is 1 reason why we are convinced rates are heading higher regardless of short term moves.
Tomorrow we get the February employment report and the forecast is plus 200,000. Who knows what the number will be but if it is a blowout–say above 225,000 we are apt to get a bit of a move higher in the 10 year treasury. We don’t think this will be adequate to push up rates too much–it is just a question of what will be the final straw that pushes rates to 3%.