Real quick. Today we have another FED meeting coming to an end followed by a Powell Presser.
With stocks at or near fresh record highs and Central Banks about as dovish as they can get, the risk is clearly there for asset prices to take a hit on anything that the market isn't ready for.
Powell's recent commentary after FED meetings has been about as bullish for asset prices as you can get.
no not at all... as long as Powell thinks high PE ratios are the norm in a world of low interest rates, Central Banks view any upcoming upticks in inflation as transitory, and the money supply continues to grow at an alarming rate, stocks have much more room to go to the upside
— UPBOptionMil (@UPBOptionMil) December 30, 2020
The transitory word is one so many disagree with. Is the recent inflationary uptick here to stay or not?
I've written about this previously. Bottom line... the FED has been right for 10+ years.
And being right has meant higher asset prices. I don't think that is going to change.
However the tight rope balancing act is going to be tougher as the economy comes out of this Pandemic.
Absent the same type of post FED meeting talk we've heard from Powell since last year, there is a risk the market could be disappointed and use today as an excuse to take risk assets lower.
Taper talk perhaps. Adjusting the dot plot. Noting the uptick in housing prices. The market will likely be looking. And perhaps it will get that excuse.
It makes it tough to be short term long, especially via calls.
However I think we could see bonds get a bid.
To sum it up, I'd be shocked to see the market continue to sideways chop. I think the risk for a pull back in asset prices is there, at least short term.