Stocks have been the most visible source of defiance as the Bank has tried to curb demand to tame the highest inflation rates in four decades
The US Federal Reserve building is pictured in Washington, March 18 2008. REUTERS/JASON REED
Measures of financial conditions track more than just equities, but stocks have been the most visible source of defiance as the Fed has tried to curb demand to tame the highest rates of inflation in four decades. Monetary policy works partly through financial markets, as the combination of higher borrowing costs and lower asset prices make consumers and businesses less inclined to spend.
Whether the Fed has tightened monetary policy enough depends on how you conceptualise financial conditions. Goldman Sachs Group’s GS US financial conditions index has headed back towards the tightest levels of the year, helped by the increase in 10-year treasury yields. Bloomberg’s US financial conditions index has tightened but remains much looser than early July.
The S&P 500 has a “key support” level at about 3,900, as Bloomberg Intelligence chief equity strategist Gina Martin Adams and senior associate analyst Gillian Wolff pointed out recently.
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