With Fed Assets And US Stocks In Lockstep, Yellen Suggests Fed Behind The Curve

As things stand, the Fed is determined to maintain the status quo. The question is, is it painting itself into a corner? Yellen may be saying yes to that.

The issue at hand is if the incipient inflation will prove to be transitory or persistent. If she is right, she is now able to say I told you so. Just the way Alan Greenspan, who preceded Ben Bernanke and Yellen as Fed chair, can say I did warn about the dot-com bubble. In a December 1996 speech, Greenspan talked about escalating asset values, using the phrase “irrational exuberance”, although he was early. The bubble just got bigger and bigger and would not pop until another three years.

Bulls bought Tuesday’s drop on the S&P 500, which, thanks to Thursday’s 0.8 percent rally, is now itching to break out. The Nasdaq 100 is yet to fill Tuesday’s gap, but that session’s low was defended on Thursday just above the 50-day.

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