Weekly Market Recap: Is Liquidity Derailing The Fed's Efforts To Tame Inflation?

Why a hawkish flex from Fed Chair Jerome Powell may be the next step

Dec 02, 2023

In this week's market recap, portfolio manager Lance Roberts warns that both stocks and bonds remain short-term overbought here and are likely to experience a near-term selloff.

After that though, he still expects stocks to rise again into the end of the month, perhaps making new highs for the year.

He also notes a growing challenge for the Federal Reserve: that as asset prices rise, financial conditions loosen— which goes against the Fed's tightening efforts.

And asset prices rose BIG last month. It was one of the best Novembers on record for both stocks & bonds.

This was in no small part due to the substantial liquidity pumped into the system by a ~$200 billion recent rise in central banking reserves, as well as continued fiscal deficit spending.

These are inflationary; and definitely make the Fed's job of taming inflation below 2% harder.

Likely mirroring this rise in both liquidity & inflation worries, gold just shot up to a record high yesterday.

How will Chairman Powell react to this?

Likely by ramping up the hawkish tough talk and threatening another rate hike.

And as always, Lance and I discuss a range of other timely topics including his market outlook for 2024, bonds, his recent trades and how investors should approach risk mitigation in their portfolios.

To watch this week’s market recap, click here or on the image below:

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Adam Taggart's Thoughtful Money®

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