It’s always been easy to lose perspective. In the modern social media age, maybe it has become even easier. Conventional wisdom rarely seems to get challenged anymore, particularly given the assignment of “what everybody knows.” Big Data is, for example, predicated on a very good theory, the wisdom of crowds. It hasn’t yet lived up to its expectations because as hard as it may be to believe defining the “crowd” isn’t easy at all.
Right now, the big theme is the global inflationary boom. Like some ancient parable, inflation is now blamed for everything good and bad. Market prices are especially susceptible, so that even the rocky stock market over the past few weeks is attributed to the rising yields fearing a Federal Reserve about to become aggressive. It led to one of the more absurd moments in recent history (which is saying something):
In the “old days,” when good news was reported, the Stock Market would go up. Today, when good news is reported, the Stock Market goes down. Big mistake, and we have so much good (great) news about the economy!
— Donald J. Trump (@realDonaldTrump) February 7, 2018
Campaigning against things like hollow stock prices and the “fake” unemployment rate, correctly in my view, the President has now completely embraced them. It’s understandable in the very same way the previous administration trotted out those same measuring devices to cover up a far more undesirable reality.
When looking at something like eurodollar futures, perspective might not be so easy of late. Any recent chart seemingly confirms the narrative. Eurodollar futures prices have sold off steadily since September 5. It does look like one of the most important and deepest markets in the world is pricing the upcoming boom.
What eurodollar futures tell us, after all, is the market view of future short-term interest rates; money rates. Tied directly to LIBOR (which isn’t going away), these markets make judgments as to what the Fed thinks it will do and why it might or might not. The chart above appears to be consistent with incoming Jay Powell’s more favorable assessments.
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