Aggressive Powell Against Omicron Records

12 de jan. de 2022

Risky assets were recovering yesterday, while the VIX Fear Index was declining. To say that there were some special reasons for this, perhaps, is impossible. On the contrary, the headlines of the leading news agencies set up rather gloomy thoughts.

Let's start with the fact that Fed Chairman Jerome Powell said that the economy is in good enough shape for the Central Bank to start tightening monetary policy without fear. Recall that the Fed plans for 2022 are as follows: a reduction in the volume of the quantitative easing program (it should be brought to zero in March), followed by 3-4 rate hikes, and the reduction in the Fed's balance sheet will be the icing on this cake.

It's strange that the markets go out of their way to ignore this elephant in the china shop. Apparently, they are waiting for the dishes to start beating. We continue to believe that it is possible to act ahead of the curve, the outcome is too obvious.

Meanwhile, the number of Covid-19 patients in US hospitals has surpassed last winter's high, with the US reporting 1.5 million. Such is the "soft" omicron. In fact, what is expected due to a sharp increase in the incidence of diseases, even with a smaller proportion of hospitalizations, US hospitals are overloaded, which may well cause a local collapse of the healthcare system.

China, meanwhile, placed under lockdown 5 million people living in the city of Anyang after two cases of omicron infection were reported there.

In general, of any rational reasons for the growth of the US stock market this week, one can only note the start of the reporting season and extremely optimistic expectations of the markets, the implementation of which investors are trying to take into account by buying in advance.