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While everyone is waiting for the key US Fed meeting, scandalous information has surfaced in the public domain about how Robert Kaplan, head of the Dallas Fed, and Eric Rosengren of the Bank of Boston, were in full swing trading stocks of funds and various companies, making over a million dollars worth of trades.
S&P500
Of course, this information created a wave of outrage in the trading community. After all, decision makers, knowing insider information on various macroeconomic data, find themselves ahead of everyone else. In fact, such trading is allowed, but only during certain time between meetings. Many people notice that although everything was done correctly according to the law, such actions violate the spirit of the Fed itself.
The whole situation adds fuel to the fire, as Jerome Powell himself, who is up for re-election, has over 100 million USD worth of assets. Of course, these assets are managed by independent individuals, but still any insider information could leak outside the Fed.
The Fed is already under external pressure on this issue. Already now there are demands to tighten the rules so that there are no more such incidents, which completely undermine the credibility of the entire US financial system.
The current scandal puts even more pressure on the Fed to roll back quantitative stimulus. After all, the further the support is pulled, the more the rich will get richer and the poor will get poorer. Controversy may force an unwinding of the tapering plan as soon as this meeting.
Also Biden will very soon have to re-nominate the head of the Fed and he is under pressure from progressive democrats who see the Fed leader as someone who will become more “multi-faceted” and begin to focus on other goals besides inflation and unemployment.
It’s going to be a tough week as the markets are ready to act. Many believe that the current situation gives a “buy bottom” signal, but there are so many contradictions. Everyone knows that markets rise slowly and fall very quickly. So it is worth waiting for the Fed’s decisions and the press conference results. Then the markets will have to digest all the information. At such moments, volatility can increase many times. Therefore, in most cases, it is worth refraining from entering the market until the market decides where to move next.
08.00 Bank of Japan press conference on monetary policy
20.00 US Federal Reserve interest rate decision
20.30 US Federal Open Market Committee press conference
Important Notes on This Publication:
The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.