* The Dow dropped 533 pts or 1.58%, S&P500 was 1.3% lower and Nasdaq -0.92%
* Gold fell to $1764 weaker than expected
* AUD fell below 75c to close at 74.78c as the DXY pushed to 92.3
* BTC fell below $36k and is now crawling its way back above it but ETH fell to $2250 and Doge now below 30c
This was seemingly sparked by Fed's James Bullard interview on CNBC when he remarked that inflation is higher than what they had expected and that it is probable that rate hikes could be brought forward to 2022 and tapering remains a prospect.
And this is what he said:
.."it's natural that [The Fed] has tilted a little bit more hawkish,"
...there "is some upside risk on the inflation forecast,"
"Fed Chair Powell has opened the taper discussion this week." ..."little concerned about housing market froth", noting that The Fed "is leaning toward idea that it may not need to be buying MBS," adding that "we don't wanna to get back in the housing bubble game... that caused us a lot of distress in 2008."
We should however note that Bullard is one of the most hawkish member in the Fed.
As Bullard was discussing these, the Dow futures was sliding heavily into the red. Bullard's comments appears to be in contrast to Powell's more soothing assessment. So why this? My take is that Bullard could be sent to jawbone the market down to tamper down the exuberance and lower the risk of a bigger and uncontrollable correction.
But against this backdrop, there are two signs that are not reconciliable with the downdraft
* The VIX is at 20.70 , still low given the heightened volatility
* The 10yr bond yield rose to 1.52pc from 1.47pc just when Bullard spoke but fell sharply to 1.44pc at the close
So really I can't make any sense out of this other than Bullard has been successful in his mission to remove the exuberance from the markets to prevent the bubble getting into a zone that could see it implode.
A month or more ago, I commented that I anticipated a correction is coming into effect either June-July or latest August and suggested it was appropriate to be sidelined. I did however moved away from a sidelined position to a measured position by microcap investing into selected sectors in particular strategic minerals, a move that I believe will pay in the longer term. My measured position is also buffered with BBUS/BBOZ insurance offsets.
The markets would need to make up their minds about whether we're getting more inflation or if inflation is transitory. While Bullard indicates that inflation could be more challenging ahead, the market is not voting alongside with a narrative that higher rates sooner would be the order of the day soon , so either this episode overnight had to do with some quad witching expiration period , in which case it would probably not be something to be overly concern about or we just saw herd mentality action as confusion meant sell and ask questions later.
