FOMC, Inflation, China, Extreme Fear, And This Just Hit A 10 1/2 Year High

FOMC, Inflation, China, Extreme Fear, And This Just Hit A 10 1/2 Year High from King World News

Here is a quick update on the FOMC, inflation, China, extreme fear, plus this just hit a 10 1/2 year high.

FOMC Statement
November 8 (King World News) – Here is a portion of what Peter Boockvar wrote today as the world awaits the next round of monetary madness:  
What I’m watching out for in today’s FOMC statement that I believe will have the most relevance is what they say on inflation and housing. The labor market comments will be solid as will other references to the economy. I mention housing because we know it’s slowing but will it matter enough for them to alter the rate hike/QT path…

Inflation
On inflation, just about every single CEO talked about raising prices on their quarterly conference calls to offset rising cost pressures. On the other hand, the Fed likes to mention market based inflation expectations which have moderated coincident with the drop in oil prices and they cite the inflation expectation figures from the consumer confidence numbers which have also fallen. I’d be focusing on what CEO’s are actually saying because it is a precursor of what’s to come.

10 1/2 Year High
While we wait, the 2 yr yield has quietly risen to a fresh 10 1/2 yr high (see chart below).

3 month LIBOR has as well. As a reminder, about 40% of Russell 2000 companies have floating rate debt that is most likely priced off LIBOR. The ratio for S&P 500 companies is about 25%. The 10 yr yield yesterday closed at 7 1/2 yr high on a closing basis at 3.235%, just off the intraday high this year of 3.25%. Today that is down by 1 bp to 3.22%.

Extreme Fear
Nothing like a market bounce to bring out the Bulls. AAII’s index of individuals said Bulls rose 3.4 pts after jumping by 10 pts last week. At 41.3 it’s the most in 2 months. Bears fell by 3.3 pts after dropping by 6.5 pts last week. It numbers 31.2, the least in 5 weeks. I don’t believe this is at all extreme enough to matter much but its certainly a change from just a few weeks ago when Bulls were 28 and Bears were 41. Also, just a few weeks ago the CNN Fear/Greed index fell to 5. Yesterday it was at 25 (still reflecting Extreme Fear).

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King World News

Interviews with market experts from around the world with a focus on precious metals.