FOMC MEETING: NAILED THE BOND YIELD MOVEMENT!

Everything rose in reaction to the interest rate news except the U.S. Dollar. The reaction we saw in the markets to this news may be like a Chess player thinking four moves ahead.  

Bonds rose sharply on the news, in other words, long-term interest rates fell. If the short-term rise in interest rates was truly justified, based upon increasing inflation and a robust economy, then long-term Bond prices should have declined, and long-term interest rates should have risen. The fact long-term interest rates fell means the Bond market is not in agreement with the Fed's analysis of the strength of the economy, and believes that the economy is too weak for rising interest rates.

This is our view also as we side with the bond market and buyside investors. The yield curve is setting up to soon reflect Stagflation

This is a flattening of the yield curve, which is an early warning of a coming slowdown in the economy and coming stock market decline.

Precious metals and the U.S. Dollar may see today's Fed action as a catalyst for a coming economic slowdown, requiring the Fed to reverse course fast and pump cash into the economy to fight the coming slowdown.

Bottom line: Bonds should have declined sharply and instead they rose sharply. This is a bad omen.

CHART POSTED PREVIOUSLY IN "IS STAGFLATION STALKING?"