DEC 4, 2017
ORIGINAL SOURCE: The Carrot Top by Sven Henrich of northmantrader.com on 12/3/17
Now that the GOP tax deal is pretty much over and the main driver of the recent run-up in the stock market, one has to ask what else is going to hold this thing up. In the last week, the Fed has been very vocal and appear to be very worried.
Here's what Fed head Yellen had to say;
“I would simply say that I am very worried about the sustainability of the U.S. debt trajectory,” Yellen said.
“It’s the type of thing that should keep people awake at night,” she added.”
And then we have Dallas Fed president Kaplan;
“As a central banker, I want to be vigilant to imbalances and distortions that can build as a result of accommodative monetary policy. I have argued that monetary policy accommodation is not “free” —there are costs to accommodation in the form of distortions and imbalances in consumer decisions as well as in investing, hiring and other business decisions. More specifically, experience suggests that the greater the overshoot of full employment, the more difficult it is to unwind imbalances when growth ultimately slows—as it certainly must.
When excesses ultimately need to be unwound, this can result in a sudden downward shift in demand for investment and consumer-related durable goods. There are surprisingly few historical examples of “soft landings” in cases where employment has risen above its maximum sustainable level.
This is an important read as a possible top could be close at hand; The Carrot Top