Today the market welcomed new Feb Chairman Jerome Powell with a big bang. During the first few months of Greenspan’s rookie year as Fed boss, the market welcomed him with an even bigger one – drop of 20+% in one day.
I am not too much worried about last Friday and today’s drop. I don’t see it is big bear market coming in, more of a overdue correction. We have now 8.5% correction in place, once it gets to 15% correction, our dovish Fed has to delay or pause rate hike or even reduce rate if market lost support. Also additional large drop will force bond yield to go down also, partially cure the problem which started the selling. We had even higher 10 and 30 year bond yields in early 2014 and the market didn’t took it as a big issue.
