Quick Chart

Policy Mistake in chart format

Markets are telling us the Fed made a mistake in December. Gold is the biggest sign of this, plus other commodities and even parabolic stocks. What is most shocking to me is how obvious this is when looking at inflation breakevens. We went from pricing 5yr average annual inflation of 1.94% at the December FOMC meeting to 2.4%, and this is for a 5yr average. Shorter dated are also exploding as crude oil breaks 87.

I do think Gold is overbought, rich etc…but it’s impossible to ignore what the markets are doing, and they will continue to do it until the Fed turns hawkish and stops them.

I am not going to try and fade Gold for awhile. I am going to think about pricing future hikes instead. Still don’t like stocks, but have to respect price action as well.