Big spending makes financial markets matter less
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Last Updated: Apr 01, 2021, 08:22 PM IST
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Synopsis
There were four distinct financial market shocks that happened in the first quarter that could have created negative spillover in financial markets and the real economy, yet none of them did.
Agencies
There was the epic short squeeze in the stocks of GameStop Corp. and other companies favored by traders using trading platforms like Robinhood.
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By Conor Sen
A lesson learned after the 2008 financial crisis was that financial market shocks can turn into real economy shocks if they re not nipped in the bud by policymakers. That led to a decade of the public grudgingly accepting but resenting an environment of slow economic growth where central banks were seen as the first responders for any little disturbance in financial markets.
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(Larry Downing/Reuters)
Welcome to the Capital Note, a newsletter about business, finance, and economics. On the menu today: FOMC meeting, tech stocks tumble, Treasurys climb, and the risks of forward guidance.
FOMC Meeting
Investors are once again testing the adage, “Don’t fight the Fed.” The Federal Reserve Open Markets Committee (FOMC), which is holding a press conference this afternoon, has for months signaled that it does not intend to raise interest rates until at least 2024. But since February, yields on U.S. Treasury notes have moved up, implying three rate hikes in 2023.
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Since the 2008 financial crisis, investors anticipating monetary tightening have generally been clobbered, and while bets against long-dated Treasuries have paid off for some in recent months, recent history indicates that the Fed wins battles with Wall Street. Today’s press conference is unlikely to reveal anything new in the way of policy, but it will indicate the extent to whic
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