Read a very well articulated article on the correleation between the Fed’s portfolio strategy and the rise of the S&P. I am not supporting or rejecting the premise and conclusion of the article as i am just not that smart, but the correlation between the two entities is very striking and worth reading. https://seekingalpha.com/article/4061144-fed-will-push-markets-lower
In another article (also a risk warning of impending market changes), it is not so much the article that i found fascinating, but a specific comment. Article: https://seekingalpha.com/article/4061158-i-can-cheezburger-visual-guide-4-market-risks
Calendar spreads, e.g. the 2-10 – that, or thereabouts, are the lifeblood of banking. Spreads need to steepen and there are powerful interests behind that – probably the most powerful. How? Timing? We got our hint of that, in an intentionally and characteristically coy fashion, from the release of the FED minutes – although most of us didn’t need that in order to know what the plan is. Like everything else of real importance, they tossed it to us over the transom as if it were a “ohh, by the way…we’re gonna unload some bonds…”
The long end yield has to come up and the FED has some long maturity paper on the books to manage that very nicely for the benefit of the banks, and the FED is ultimately all about the benefit of the banks.
So that’s the priority. The timing, they say, will be later this year and it may take 5 plus years of careful coordination to fluff up and sustain an increasingly erect yield curve. There’s plenty of motivation along those lines – and lots and lots of money to be made. My guess, given the team that will soon be in the FED driver’s seat, is that this process will be thoroughly corrupted and front run by friends and family – which means we’ll be whipsawed in and out of the trade by design.