With the stock market down and the Philly Fed flashing a warning sign about manufacturing, the bond market is feeling better about the easy-money pipeline *brought to you by the Federal Reserve.
(daily chart)
Easy Fed policy is the ultimate trap: it inflates asset prices and that provides a boost to the economy. But at the faintest hint of less QE, the stock market throws a fit, which makes continuing QE more important.
At some point the market will have to take its medicine but I don’t see any appetite among the important members of the Fed to make that time now.
