Good morning contrarians! The Federal Reserve yesterday kept its key interest rate unchanged as expected but made enough noise about “higher for longer” to scare investors. Stocks and bonds sold off.
Whether they’re justified or not, there is a sense now that maybe Fed fears have reached a bit of a fevered pitch. Just look at the headline in today’s Wall Street Journal:
“Higher Interest Rates Not Just for Longer, but Maybe Forever”
Ignoring for a minute that “forever” is a pretty long time, this take conveniently forgets that we’re talking about the same Powell Fed that flooded the system with liquidity during Covid and then kept rates too low for too long. The Fed may have to keep raising rates now (thanks to its own doing), but there is no way in hell this continues “forever.”
This is the kind of language you look for to indicate a turning point. And if fears of Fed are indeed at a peak, then fear of fixed income — specifically short-term bonds — could be at a peak as well. And that could be a buying opportunity for bonds…
Free audio included in today’s briefing. Check it out: