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Re: Inflation-"Ride of the Volkyries" Thoughts.
Just read Zoltan Pozsar's excellent piece dated 5/13/22 and it corroborates a lot of my own views. Here are my thoughts.
-Overton Window has shifted from protecting asset values to creating demand destruction via recession if necessary to tame inflation.
-Those expecting a quick return to QE are going to get rug-pulled.
-He quotes Bill Dudley: "one way or another, to get inflation under control, the Fed will need to push BOND YIELDS HIGHER and STOCK PRICES LOWER." (emphasis mine).
-As most of you know, I have been calling for a BEARISH STEEPENING.
-"Good is bad" - rallies, strong household balance sheets "mean the Fed needs to lean against the wind harder to shock demand lower."
-I would add that any fiscal policies that are STIMULATIVE would further embolden the Fed.
-"Consider the possibility that the Fed, on a singular mission to slay inflation, won't rest in its pursuit of tighter financial conditions until YIELDS SHIFT HIGHER, STOCKS FALL MORE, AND HOUSING TURNS AS WELL." (emphasis mine)
-"The crypto sell-off is just an unexpected bonus..."
I wrote last year about the transmission mechanism:
Opex commodity inflation -> hawkish Fed->higher rates->lower asset prices
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