President Biden's first year in the White House has ushered in record job gains, unprecedented wage gains for low-income workers and. Julia La Roche is a correspondent for Yahoo Finance. But economists say surging inflation is top of mind to voters. "If you can't absorb those bonds and the yields are allowed to rise, well, that's going to be really problematic for valuation the stock market, which is depending on zero short-term interest rates and suppressed long-term interest rates, via quantitative easing," he said. Gundlach warns this could affect financial markets broadly. Because if the rates go up, the few buyers that there are for treasuries - foreigners have been selling for years, domestics have been gently declining in their ownership - all you got is the Fed."Ĭombined with the elevated debt and deficit levels in the U.S., if inflation remains high, it's "going to be a really big problem." "They say there's no limit to their quantitative easing, and stuff like this. Gundlach said he'll "get worried if the inflation remains elevated through the summer" and bond yields start to test the Fed's resolve. "So you wonder if it's just a brainwashing mechanism the Fed's trying to get investors into on this transitory stuff," he questioned. Gundlach later observed that Fed officials using the same talking points "starts to sound like some of the mainstream media where every single guest from either the tribe on the right or the tribe on the left has the same talking point."
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