I’m getting tired of the ‘Fed got it wrong‘ talk by the markets.
Should the Fed have raised rates in December? In my view, no.
But financial markets were expecting it, nearly demanding it. Now that they’ve got it, financial markets are throwing a full on tantrum, like some QE-spoiled 2 year-olds.
Which reminded me of the fantastic Reasons my son is crying Tumblr./
As any parent knows, the best way to deal with an irrational, crying child is to not give in to it in the first place (ie don’t raise rates, and better yet, don’t raise expectations of rates). But what to do once the tantrum is started? Put them on the naughty step until they’re willing to behave.
Because the only response to unwinding the ‘mistake’ won’t be an end to the bear market, but full on market meltdown:
Unwinding would be the Fed saying that the Global economy isn’t very healthy and we should all be worried. It would validate the market’s New Year tantrum and bring on more volatility.
Instead, the Fed should take the responsible parent approach and try to reset expectations on rates: rates are low and are going to stay low for a very long time.
