Significant Expectations

“When the big expected thing happens, whenever that is, it will be fully expected, and we should all be able to handle it without much trouble.  That’s been the message from a couple of richly credentialed central bankers in the past day or so, as they try to reassure investors that by the time the Federal Reserve starts snugging up interest rates, the move will be well telegraphed and will occur for the right reasons.”  Remember: the future is gradual…slow…calm.  And far away: “regardless of when the first increase comes, futures show traders don’t see rates exceeding 1 percent by the end of 2016, versus the Fed’s estimate of 1.875 percent.”  Furthermore, there is a general belief that “policy makers have consistently overestimated the strength of the economy,” which is fair for GDP, but definitely not fair when it comes to the unemployment rate.  Either way, the Fed is “optimistic and hopeful their policies are going to work the way they are intending.”  “Pessimists, however, believe the pilot is flying blindly through dense clouds with a faulty radar and constant risk of storms, making the policy normalisation process particularly risky.  ‘For me the new thing to look out for is what they do to the portfolio,’” says chief investment officer.  In case you forgot, the Fed is still flying with $4 trillion explosives on board.  “BlackRock’s Investment Institute pointed out in a recent report that a third of the Fed’s entire Treasury portfolio, about $785bn, comes due by the end of 2018…’Letting these bonds run off represents an additional tightening of monetary policy — a dynamic that may well have greater impact on financial markets than the ending of [zero interest rates] in the short run.’”  Meanwhile, Can Your Portfolio Survive Rising Interest Rates?  “The average [compound annual growth rate] for the diversified portfolio (30% S&P 500, 30% MSCI EAFE, 40% Barclays Agg) during rate hike cycles has been 8%, which is lower than the overall 12-month return of 9.7% but still quite robust…Of the eight rising rate periods since 1976, there have been zero instances where this diversified portfolio has produced a negative return.”  Also, in case you needed a reminder


USA: A Tax Deal That Fixes U.S. Roads?

“The clever twist is that President Barack Obama has taken boosting infrastructure spending — a favorite policy of Democrats — and tied it to a favorite policy of Republicans — reforming corporate taxes…the president wants a one-time 14 percent tax on these accounts, with the revenue earmarked for infrastructure projects, and to allow the funds to be repatriated to the U.S…the six-year, $478 billion infrastructure upgrade to highways, bridges, and public transit in the U.S. would also replenish the Highway Trust Fund.”


China: Mountains Everywhere


USA: GDPNow At 0.8%


USA: How Grand Theft Auto Explains Productivity Slowdown Mirage


Yellen: Not Going To Jackson Hole


Gross: Janus Global Unconstrained Is Down 3% On The Short Of A Lifetime


FIFA: Did You Think The NFL Has Problems?


What: CEO Prepares For Post-Unicorn Modeling Career Becoming A Real Business Boy!


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