August 22, 2019

Weighing in on the Hole

Weighing in on the Hole

With Donald Trump’s economic decisions taken mostly against the advice of his top advisers, one wonders if a meeting of the top economic minds in the world has any potential to sway financial markets.

The Federal Reserve Bank of Kansas City’s Economic Policy Symposium brings together the finest minds in the financial world to “promote discussion and the exchange of ideas” regarding a different chosen topic each year.

This year, threatened by geopolitics, loose cannons and corporate crypto challenges, the topic is “Challenges for Monetary Policy” – a perfect trading platform for central bankers to vent their current frustrations.

Muted Market Reactions – USUALLY

Although markets have reacted quite mutedly in the past, they tend to overreact when bankers throw down the gauntlet. In 2010 treasury yields soared by 1.7%, gold by 30%, and indexes wavered at 200-300 point oscillations within hours of Ben Bernanke’s announcement of fiscal easing; they shook and by 2.5% the following year on a similar note; and in 2017 the DJIA fell 1.5%  on Janet Yellen’s defence of regulation.

This year, the stakes are especially high, as bankers must show independence from their sponsors and the threats are critical, as Libra threatens the world’s fiscal order and trade wars and Brexit shock markets by the hour.
Will markets react to their makers?