$1.1 Trillion Fund Is Buying Everything With Fed At "Market's Mercy"

Earlier this month, when the Fed released the full transcripts from its 2013 FOMC meetings, there was one particular moment of epiphany by now-Chair Jerome Powell, when he unveiled what the markets have known all along: that the Fed is hostage to the market's every whim, to wit:

I have one final point, which is to ask, what is the plan if the economy does not cooperate? We are at $4 trillion in expectation now. That is where the balance sheet stops in expectation now.If we have two bad employment reports, the markets are going to move that number way out. We’re headed for $5 trillion, as others have mentioned.  And the idea that President Kocherlakota said and Governor Duke echoed— that we ’re now a captive of the market — is somewhat chilling to me.

The idea may have been chilling, but unfortunately for the Fed, it's absolutely accurate, and it's a fact which traders once again confirmed earlier this year when after the S&P's near bear market tumble, Powell caved and reversed his formerly hawkish stance.

The Fed's inability to oppose the market is also the only investing thesis one needs for this year, according to a $1.1 trillion fund manager, who claims that the path to outperformance in 2019 is "as simple as betting the Federal Reserve will temper its tightening plan" and do the bull market’s bidding. Expecting even more dovishness out of the Fed, the fund is buying up virtually all risk assets (with the exception of Europe, where the ECB remains in a tightening phase).

Echoing what Jerome Powell first realized in March 2013, Wouter Sturkenboom, Northern Trust Asset Management’s Amsterdam-based chief investment strategist for Europe and Asia said that the Fed is "at the mercy of the markets" and "that’s why we have re-instigated a risk position" across stocks in the U.S. and emerging markets at the expense of investment-grade bonds. Naturally, the firm which oversees $1.1 trillion in total assets, sees clear sailing for the rally for now.

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TheExitFirm 1 month ago Member's comment

Like it or hate it, Zerohedge does come up with some interesting (and often thought provoking) stuff!

Bill Myers 1 month ago Member's comment

Too true. It amazes me how ZeroHedge has such a mix of critical news and complete sensationalistic garbage. I actually like how TalkMarkets seems to only hand pick the best to feature here. Saves me from having to filter through the crap.

Gary Anderson 2 months ago Contributor's comment

The Fed is hostage to the market until wages explode.