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Today Jack welcomes Andy Constan, macro investor and publisher of The Damped Spring Report, and Joseph Wang, former senior Fed trader and author of Fedguy.com, to discuss how the Fed’s reduction of its balance sheet via quantitative tightening (QT) is impacting market liquidity and future returns.
Constan argues that favorable market conditions that allowed risk assets to rise during the summer are no longer present, and that this “false dawn” is over. Wang argues that QT will drain the banking system of reserves and the Fed may have to plug “leaks” in the financial plumbing.
Filmed on September 7, 2022.
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(00:44) Quantitative Tightening's (QT) Impact on Markets
(10:38) Equity & Bond Market Flows Over The Past Few Months
(15:46) Volatility (Vol) Targeting
(24:18) Equity Risk Premium Model
(32:13) The "False Dawn" In Asset Prices
(38:28) Joseph Wang on Treasury Issuance
(43:58) Joseph on "The Reserve Gap"
(53:50) The Fed's Ample Reserve Regime
(57:11) Andy Constan's Outlook on Bonds
(1:02:02) How Far Can The Fed Go In Hiking Rates?
Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.