Powell May Not Know It Yet, But The Fed Is Now Trapped

“The problem is simple: for the Fed, the sequence of events during past recessions has been: Fed cuts, the SPX crashes, Fed cuts. So, as Citi notes, the SPX crash is a symptom of greater economic weakness rather than the cause.”

Of course, it’s a bit more nuanced than this, because as Citi also shows, for all three slowdown periods the sequence of events is: Fed hikes, equity market crashes, Fed cuts