The Fed’s Policy Turn: New Outlooks for Rates, Equities, and Bitcoin

Mapping how a changing Fed reshapes capital flows across the risk curve

The Fed’s Policy Turn: New Outlooks for Rates, Equities, and Bitcoin

I sent out all of the new interest rate sensitivity models, which can be found linked below. As a reminder, all of the Interest Rate Sensitivity Models will be free until Wednesday of next week. After Wednesday, all of the models will be exclusively reserved for paid subscribers.

I cannot emphasize enough the significance of the period of time we are in with interest rates. When everything in macro converges to the currency, understanding interest rates becomes THE KEY to navigating the credit cycle. The connected video for the models can be found here:

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What I want to cover today is HOW the changes we saw at Jackson Hole last week fit into the credit cycle I have been laying out.

Main Idea: As we came into Jackson Hole, Powell was confronted with the risk of higher inflation, which he explicitly ignored. This represents HOW the Fed is accepting a highly accommodative stance to resilient growth and accelerating inflation. This falls directly in line with the logic I have been laying out regarding short-end rates vs long-end rates:

“It doesn’t matter who the Fed Chair is. It can be Powell, Volcker, or Trump. Every action has an opposite and often nonlinear impact that is always priced by markets. If the Fed cuts rates to zero, it will be reflected in the long end of the curve. If they implement yield curve control to suppress the long end, the currency will fall.”

The entire question we face now becomes, HOW will these flows be transmitted to long-end rates, the currency, and risk assets as we move into the September FOMC meeting?