Feeling Anxious?
Clearly not a great place to be on this chart as the next phase is Denial, as in: "I'm sure the markets will bounce" or "I'm sure the Fed will save us" but the Fed just told us they are not going to save us at all with more free money. In fact, there will be no more free money by April and, on top of that, they are going to start raising interest rates.
Are they doing this because we have a healthy econmy with full employment and strong GDP growth? No. They are doing this because we have miscalculated the economy, miscalculated the pandemic and now all the misallocated money that has poured out of the Fed is causing rampant inflation that they don't know how to contain – so they are going to do the same thing that worked in the 1980s and hope nothing has changed in 40 years – because they don't actually have any new ideas.
And it's not just our Central Bank that has concerns. Early this morning the Bank of Japan said it would wind down its holdings of commercial paper and corporate bonds, but kept monetary policy ultraloose overall. The benchmark Nikkei 225 index fell 1.8%. Other Asian indexes were mostly lower, with Hong Kong’s Hang Seng down 1.2% and the Shanghai Composite Index 1.2% lower. On Thursday, the Bank of England raised interest rates, taking investors and analysts by surprise. The European Central Bank said it would phase out an emergency bond-buying program, while ramping up other stimulus measures.
Omicron has prompted restrictions all around Europe ahead of the holidays and, while it may be too late to cancel Christmas, sick relatives that can't get into overwhelmed hospitals are putting a damper on the holiday spirits. On Wednesday, the UK reported the highest number of new Covid cases since the pandemic began (78,600 vs 68,053 in Jan – the previous record). Omicron infections are doubling in the UK every 1.9 days – a very dangerous number! Denmark, Norway and France have shut down nightclubs and Germany is now considering making vaccines mandatory.
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