by David Brady
Sprott Money
Little has changed in the past week in terms of the narrative. The Fed is still hell-bent on conquering inflation, per the latest FOMC minutes. But cracks are developing in the façade.
The Fed cites the strength of the economy as an enabler of monetary tightening to bring down inflation, but all data contradicts that assumption. The economy is weak and getting weaker. Now the market is starting to realize this, and expectations for future rate hikes are softening. Stocks have rebounded off their lows, and bond yields and the dollar are off their highs. A short squeeze in stocks is likely.
Yet, in this crazy market, it is a rally in stocks that will facilitate further tightening by the Fed.