The Week When Some Big Economic Worries Began to Fade

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Multiple central bank meetings, a trade deal, a U.K. election, impeachment—all in the span of a week. To make sense of it all, Mike Schumacher, the head of rates strategy at Wells Fargo Securities, joins the “What Goes Up” podcast. All in all, the week’s developments seem to auger well—especially when it comes to inflation, trade and the repo market.

“The Fed would like to see inflation tick up, frankly,” Schumacher says. “From Chairman Powell’s discussion recently, he’d be thrilled if inflation were 2.2-2.75% for an extended period.” Central banks, he adds, “know what to do with inflation: you just hit it over the head. So the Fed could let inflation run for a while.’’

The proposed partial trade deal between the U.S. and China is a modest one, Schumacher says, and may mean “the 10-year Treasury goes to 2.10% maybe 2.15%.” Given the significant easing by central banks since summer, “anything a lot higher than that is probably out of reach.’’ Schumacher also says he expects the Fed to clean up the recent problems in the repo markets.

Also joining the podcast is Bloomberg News Executive Editor Chris Nagi, who shares his views on the equity market.

Mentioned in this podcast:
Job-Crusader Powell Signals Long Policy Pause Amid Low Inflation
Fed Aims a Half-Trillion Dollar Liquidity Hose at Year-End Risks
It Took 13 Years for the Crisis to End in U.S. Financial Stocks

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