here's a question for you
How do you know that the Federal Reserve System is a bad idea?
Strong macro-economic numbers = bearish price action in equities.
It is called bizzaro-world.
4 Replies
Its called max pain
Yeah, i get it. I think that we should be careful about using the word "should" with respect to the financial markets. But really, strongly positive news "should" be max pain for the bears. Or it should be some pseudo random balanced strategy or something. But it's not. For as long as I can remember, the macro trade is just "discount the fed."
I wonder when these games started. Do we have any old timers here, were markets just trading the Fed in the 70s, 80s, and / or 90s? I kind of think not. It seems like more of a post '08 phenomenon to me. But I really don't have much of a clue about pre '08 trading.
It's been happening forever. But it's only a short-term situation. Traders vote that rates going up (or not going down as fast as they hoped) will dampen profits so share prices go down. But, as time moves on, profits get counted and share prices go up.
It's been happening forever. But it's only a short-term situation. Traders vote that rates going up (or not going down as fast as they hoped) will dampen profits so share prices go down. But, as time moves on, profits get counted and share prices go up.
Yes, clearly the extremes inform the mean, there is profit taking, etc. And the market is constantly "calibrating."
I guess what I am saying is, it seems to me that if the unit of measure with which the calibration is performed gets expanded and contracted exogenously, then we add confusing complexity and dynamics to the calibration process.
I suppose one could argue that it is not exogenous if the Fed follows its mandate and is really data driven. But then, why not just implement an algorithm?
TLDR: my same story --> rates should be set by the market. I posted because I was inspired by the employment data and price action.
