{"id":42874,"date":"2019-01-17T08:36:54","date_gmt":"2019-01-17T13:36:54","guid":{"rendered":"https:\/\/olduvai.ca\/?p=42874"},"modified":"2019-01-17T08:36:54","modified_gmt":"2019-01-17T13:36:54","slug":"volatility-holds-the-key-to-markets-in-2019","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=42874","title":{"rendered":"Volatility Holds the Key to Markets in 2019"},"content":{"rendered":"
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Volatility Holds the Key to Markets in 2019<\/a><\/h3>\n

Over the last two weeks, after making good on the four-rate interest hike of 2018, Fed Chairman, Jerome Powell, became more dovish to start 2019.<\/p>\n

His change in tone is worth considering because of his historical stance on reducing the amount of artificial stimulus coming from the Fed. Last week, after the required five-year holding period for Fed transcripts<\/a> were up, we got a glimpse<\/a> into Powell\u2019s thoughts from 2013, before he was Chairman.<\/p>\n

Powell tried to persuade then-Chairman, Ben Bernanke, to reduce the Fed\u2019s stimulus, even though it would lead to greater near-term market volatility. That was when the third round of the Fed\u2019s asset-buying program (QE3) was in full swing. The Fed was purchasing an estimated $85 billion per month mix of Treasuries and mortgage-backed securities.<\/p>\n

To indicate that the Fed wouldn\u2019t buy bonds forever, Bernanke floated the idea of slowing down its program, or \u201ctapering,\u201d at some non-defined future date.<\/p>\n

Powell, on the other hand, believed the market needed a specific \u201croad map\u201d of the Fed\u2019s intentions. He said that he<\/a> wasn\u2019t \u201cconcerned about a little bit of volatility\u201d though he was \u201cconcerned that there may be more than that here.\u201d<\/p>\n

Indeed, once Bernanke publicly announced the possibility of the Fed\u2019s bond-buying program slowing down, the market tanked, in a response that became known as a \u201ctaper tantrum<\/a>.\u201d As a result, Bernanke backed off the tapering idea.<\/p>\n

Fear of more taper tantrums kept the Fed in check after that. The Fed ultimately waited until it had raised rates sufficiently, before starting to cut the size of its balance sheet. But now Powell is the Chairman. And it seems that he is much less comfortable with volatility than he was under Bernanke, as his most recent remarks indicate.<\/p>\n

But it certainly wouldn\u2019t be the first time a Fed chairman has modified his views when he was in control. Alan Greenspan, for example, was a staunch advocate of the gold standard when he was younger (and as presented\u00a0in Foreign Affairs<\/a>). But once he was Fed head, suddenly he thought a gold standard wasn\u2019t such a hot idea after all. Go figure.<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Volatility Holds the Key to Markets in 2019 Over the last two weeks, after making good on the four-rate interest hike of 2018, Fed Chairman, Jerome Powell, became more dovish to start 2019. His change in tone is worth considering because of his historical stance on reducing the amount of artificial stimulus coming from the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[68,11023,303,1849,431,16888,534,535,575,3650,2773],"class_list":["post-42874","post","type-post","status-publish","format-standard","hentry","category-economics","tag-ben-bernanke","tag-daily-reckoning","tag-fed","tag-financial-markets","tag-interest-rates","tag-jerome-powell","tag-monetary-policy","tag-monetary-stimulus","tag-nomi-prins","tag-us-federal-reserve","tag-volatility"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/42874","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=42874"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/42874\/revisions"}],"predecessor-version":[{"id":42875,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/42874\/revisions\/42875"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=42874"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=42874"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=42874"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}