Despite what the talking heads continue to spew to justify all-time high stock market valuations, the 'fact' is that year-to-date, US Macro data has now performed the worst of all global macro indices. Furthermore, the pace of collapse in the last 4-weeks is the fastest in 8 months. What is perhaps most ironic is that US Macro peaked at the last FOMC meeting (when the Fed decided that data was not supportive enough to Taper) so any surprise today simply supports the fact that the Fed's decision is anything but fundamentally driven (and instead perhaps driven by the four 'bad' reasons for a tapering.)
US Macro has fallen to the worst performer year-to-date... (andnote when the un-Taper decision was made - at 'peak' macro)...
Collapsing at its fastest in 8 months (and note that each successive peak since the recession has seen lower highs - as the wealth effect or stimulus effects have become less and less)...
So any surprise decision or wording change today can only be driven by one (or more) of the following four ;bad' reasons:
1. Deficits are shrinking [7] and the Fed has less and less room for its buying
2. Under the surface, various non-mainstream technicalities are breaking in the markets [8] due to the size of the Fed's position (repo markets, bond specialness, and fail-to-delivers among them).
3. Sentiment is critical; [9] if the public starts to believe (as Kyle Bass warned) that the central bank is monetizing the government's debt (which it clearly is), then the game accelerates away from them very quickly - and we suspect they fear we are close to that tipping point
4. The rest of the world is not happy. [10] As Canada just noted, the US monetary policy will be discussed at the G-20
Simply put, they are cornered and need to Taper; no matter how bad the macro data and we are sure 'trends' and longer-term horizons will come to their rescue in defending the prime dealers' clear agreement that it is time...