Stormy Weather

The economy and the Fed are in a tug of war & capital markets are stuck in the middle

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Succinct Summary: The economy and the Fed are in a tug of war and capital markets are stuck in the middle. Despite the weak sentiment, consumers continue to spend. This is making it difficult for the Fed to break inflation and forcing the Fed to continue to raise rates aggressively. Capital markets are watching this situation unfold nervously. After years of zero interest rates, equities are not priced for higher rates. Jamie Dimon says that more pain is likely.

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Macro

The Fed is having trouble breaking inflation

"The environment clearly is still very inflationary with a lot of supply chain challenges across the industry and everybody trying to have responsible behaviors to maximize the value of its brands." - PepsiCo ( $PEP) CEO Ramon Laguarta

“Inflation is a bit like toothpaste. Once you get it out of the tube, it’s hard to get it back in. The Fed is furiously trying to wash that taste out of their mouth -- If we go into recession, that has really negative consequences for a variety of assets." - Hedge Fund Manager Paul Tudor Jones

And so it’s continuing to tighten aggressively