Lots of well-meaning pundits are pounding the table on the fact that although the Federal Reserve is raising rates, financial conditions are easing, muting the rate rises effects.

Well, these financial prognosticators might have good intentions, but the reality is that this is nothing new. I don’t deserve any credit for this next observation – it was brought to my attention by Bloomberg reporter Luke Kawa. Over the past three hiking cycles, financial conditions have either gone sideways, or more commonly, actually eased.

I guess you might argue that during this cycle, financial conditions are easing at a greater pace than previous campaigns, but the phenomenon is hardly unique. Financial conditions will only worsen once the Fed goes too far. By the time we see the bottom indicator falling, a recession will already be in the cards.

So when you read an article citing that financial conditions are not tightening as the Fed raises rates, click the next story button. Financial conditions will not fall until the economic cycle is about to roll over. Sure, we might get some squiggles up and down, but if the Fed was successful in tightening financial conditions as much as strategists desire, then we would be staring at the start of the next recession.

Norway – tapping out at the bottom?

A couple of days ago, Norway’s sovereign wealth fund made headlines when they announced they would sell their oil equities from their sovereign wealth fund. From Bloomberg:

The $1 trillion fund that Norway has amassed pumping oil and gas over the past two decades wants out of petroleum stocks.

Norway, which relies on oil and gas for about a fifth of economic output, would be less vulnerable to declining crude prices without its fund investing in the industry, the central bank said Thursday. The divestment would mark the second major step in scrubbing the world’s biggest wealth fund of climate risk, after it sold most of its coal stocks.

“Our perspective here is to spread the risks for the state’s wealth,” Egil Matsen, the deputy central bank governor overseeing the fund, said in an interview in Oslo. “We can do that better by not adding oil-price risk.”

The plan would entail the fund, which controls about 1.5 percent of global stocks, dumping as much as $40 billion of shares in international giants such as Exxon Mobil Corp. and Royal Dutch Shell Plc. The Finance Ministry said it will study the proposal and decide what to do in “fall of 2018” at the earliest.