The Fed tends to sugarcoat their explanations.
We have great respect for the Fed and its individual members. However, sometimes when they speak, they are full of baloney. A better way to describe my feelings is to say that I respect what the Fed does in their actions, but I just think that the reasons they give in public for those actions are a bunch of BS…..Basically, they sugarcoat their reasons for engaging in certain actions…and this tendency means that the markets could be facing some serious risks in the months (and even years) ahead.
It's something they've been doing for a long time.
The tendency of the Fed to sugarcoat their public explanations is something we have seen on many different occasions over the past decade. When they delayed their plans to “taper” their bond purchases in the summer of 2013, it was not due to a slowing in the economy (like they said it was). More recently, the Fed’s pivot away from their tightening policy of raising rates and QT (the shrinking of their balance sheet) had little to do with U.S. banks’ demand for reserves (like they said it was).
Similarly, the decision by the Fed to take their more accommodative stance to the next level and cut rates at their next meeting has very little to do with concerns over low levels of inflation or concerns over the rise of “uncertainties” (both which has been with us for a VERY long time). Despite what they have told us, the reasons lie elsewhere.
What is the Fed trying to hide?
In other words, I believe the real reason that the Fed has felt the need to sugarcoat the reasons for easing over the past decade…is because they wanted to hide the real risks…for the simple reason that it might make the strains/stress/problems much worse.
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Matthew J. Maley
Chief Market Strategist
Miller Tabak + Co., LLC
275 Grove St. Suite 2-400
Newton, MA 02466
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