On Thuesday night, US core inflation accelerated month-on-month, but overall it was in line with expectations. The bankruptcy of $SVB Financial Group(SIVB)$ has been properly handled, and there is even news that $SVB Financial Group(SIVB)$ has reopened for business, and customers are like clouds. The U.S. stock market rallied, and the three major indexes all rose.
Markets are now betting the Fed will raise rates by 25 bps next week, or even stop raising rates. Nomura was the most aggressive, even predicting that the Fed would start cutting rates. In fact, the market is using the bankruptcy of Silicon Valley Bank to hijack the Fed's monetary policy. After all, the third implicit goal of the Fed's monetary policy is to maintain the stability of the financial system.
The biggest similarities between the bankruptcy of Silicon Valley Bank and Lehman is that their Chief Internal Affairs Officer and Chief Financial Officer are the same person. The unemployment rate on Wall Street was 50% in 2008, and the white-collar workers in Wallstreet had to endure the pain of unemployment and go to the major banks to queue up to withdraw money, for fear that they would suffer the embarrassment of losing their jobs and savings if they went late. '
Now, before the bankruptcy of $SVB Financial Group(SIVB)$ , the year-end award was issued first. It is really the best employer of the year.
After the Fed entered the interest rate hike cycle, has the US inflation been under control?
That depends on what indicators you are looking at. In terms of indications, the overall level of inflation and core inflation continued to decline slowly, but accelerated month-on-month. At the same time, PCE personal consumption inflation in January exceeded expectations and accelerated month-on-month. The market seems to have forgotten that this data is the most important inflation data that the Fed pays attention to.
The "sticky inflation rate" of the Atlanta Fed continued to rise sharply, but the "non-sticky inflation", that is, the inflation rate of commodities whose prices are easy to change, dropped sharply, causing the overall inflation level to drop slightly (as shown in the figure). What kind of inflation is bearing the cost? Or the market consensus is pretending to be deaf and dumb.
U.S. sticky inflation rises sharply picture
If the previous market consensus believed that the bankruptcy of Silicon Valley Bank was a systemic risk and the Fed would cut interest rates to save it, then the reopening of Silicon Valley should prevent Silicon Valley from becoming a factor in determining the Fed's interest rate next week. But if the systemic risk in Silicon Valley has not been lifted, then the market shouldn't celebrate with a surge last night. These two deductions cannot be logically consistent. However, now even the new debt king Gundlach believes that the Fed should not continue to raise interest rates.
If it is said that Powell is the "Volcker Eagle", then the current real interest rate in the United States is still negative. During the stagflation period in the 1970s, the Fed raised interest rates until the real interest rate in the United States turned positive. 2003-08, 2014, 2018 as well. This is why, every time the Fed raises interest rates, there is a crisis. Will it be different this time?
P.S. — It is rumored in the market that Goldman Sachs is now preparing to bid for Silicon Valley Bank’s bond portfolio after suggesting that Silicon Valley Bank sell stocks to raise funds to blow up Silicon Valley Bank.
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