As you know I'm focused on bonds and TLT as a key driver to markets. TLT just dropped below a key short term level 87.
TLT down means long term rates UP.
The Fed may be holding back cuts due in part to that reason. If they cut, I think it has the risk to lead to a bond crash. YES. It would mean yields jump which can potentially further actually crush equity markets. It would not be a positive.
Why?
Because if short term rates go down that can incite inflation worries for bond investors. Bonds hate inflation.
Right now you already have negative bond action on news:
Good News Low Inflation + Bad Action Bonds = Bearish. Bonds going down on good news is a sign of negative action.
If the Fed cuts into that I think that risks getting worse. And I think the market has risk to collapse on that.
I currently do not think the Fed is cutting based on Powell's last week “Tension” comment... But if Trump gets his way for a Fed cut, I think it will actually be a bad thing for markets.
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