"Grouchy" SocGen Analyst: "Fed Will Be Buying Again Long Before They Finish Normalizing"

Tyler Durden's picture

Over the weekend, One River's CIO Eric Peters said that last week's announcement by the Fed marked the "end of the QE era." At least one person, however, is not convinced: as the "increasingly grouchy" SocGen FX strategist Kit Juckes writes in his overnight note, slams calls that the Fed's announcement was a "hawkish hike", and says that "while we got more detail about the Fed's plans to run down its balance sheet, these amount to a pace so slow that they'll still have boatloads of bonds on board when the next recession strikes. My guess is they'll be buying again long before they finish normalising the balance sheet (whatever that really means)."

Looking at the Fed's disclosed projections, which anticipate the Fed to continue normalizing until 2020, or well past the point the next recession is expected, his skepticism is certainly warranted.

Excerpts from his note below:

I'm getting increasingly grouchy whenever anyone says that last week's FOMC outcome was a ‘hawkish hike'. Any day now, I'll start denying that it was actually a hike at all. Rates went up, of course, but since the groundwork for that move started months ago, it was really only confirmation of something that had effectively happened already.

 

And while we got more detail about the Fed's plans to run down its balance sheet, these amount to a pace so slow that they'll still have boatloads of bonds on board when the next recession strikes

 

My guess is they'll be buying again long before they finish normalising the balance sheet (whatever that really means). The ‘dot plot' was unchanged after accounting for personnel changes, and while it implies more/faster rate hikes than the market expects, Chair Yellen did nothing to persuade the market to take the dots seriously in her press conference.

 

The market reaction has the level of rates two years down the road almost exactly where it was before the Fed hiked, and risk assets around the world are rallying again as the ‘carry party' resumes.

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Ouagadoudou's picture

Anyone doubts it ?

root superuser's picture

Of course there are doubts. We cant be certain. Men pulling the strings certainly know what they're doing and what will be the result of this. My guess is they desire that result and FED is going to proceed with "normalizing".

JRobby's picture

Yes they will. All propaganda about "normalizing" anything. We are way past a path back to normal.

onthedeschutes's picture

It's probably better to talk in terms of the entire central bank cabal versus singling out just the Fed.  After all, the central banks now coordinate their actions as a single team.  So it is entirely possible that as the balance sheet "normalizes" for one, it swells for another.  

lester1's picture

The Fed already buys stocks !

Iconoclast421's picture

Their balance sheet will explode to over $10 trillion in the next recession. Lots of pigs to bail out.

short screwed's picture

You don't . You'll get to bail in though.

petar's picture

Another "analyst" who has No idea what is he talking about.

Serfs Up's picture

The guy is still confused.

The Fed has not drained a single dollar of liquidity with their ""hikes""

In fact they have upped the many billions they hand ot the big banks courtesy of IOER.

This is both simple and important...rate hikes are not what they used to be.  They won't behave the same.  They already aren't.

venturen's picture

no one gives up Financial Heroin