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The Recession Paradox | Alfonso Peccatiello
Forward Guidance
The Fed's Quantitative Tightening and the Stock Markets
Don't fight the Fed narrative: Fed doing QE means buy stocks, Fed doing quantitative tightening means stocks are risky./nRip roaring equity market despite quantitative tightening: Stocks have been outperforming bonds during quantitative tightening./nChallenge to commonly held belief: High interest rates and quantitative tightening may not necessarily be bad for stocks./nStock market performance in 2006 and 2007: Despite Fed funds being over 5%, stock markets did well./nStock market performance in 1999 and 2000: Despite Fed funds being much higher than zero, stock markets were in a bubble./nNegative risk premium: In order to participate in the bubble in 1999 and 2000, people were willing to pay negative risk premium.
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