Consider what has happened since President Biden was elected. The S&P 500 total return index (green index) has risen thanks to The Federal Reserve’s balance sheet expansion (orange line) with COVID. Until 2022 when the expectation of Fed rate hikes surged from 3 in late December 2021 to 9.4 expected rate hikes over the next 12 months (yellow line).
The US Treasury total return index (white line) has gotten crushed with The Fed’s signals of rate hikes and quantitative tightening (QT). Call it “White Line Fever.” The commodity total return index (blue line) has surged as The Fed’s expected rate hikes have risen from 3 to 9.4 in 2022.
Is The Fed causing a Great Reset in housing? In 2022, we see the surge in Fed rate hike expectations leading the 30-year mortgage rate to be nearly 5%. The last Case-Shiller home price index was for January and it was still raging at 19.17% YoY growth. Let’s see if The Fed’s QT will slow down home price growth. But home prices are growing at 4x 30-year mortgage rates.
Yes, its a cold one out there. But the Biden Administration is engaging in reducing fossil fuel supply and pushing towards “green” energy such as inefficient solar panels, eagle-killing wind turbines, and ocean turbines.
As a consequence, natural gas futures are up 93% from January 1, 2021 while coal futures are up 133% and WTI Crude spot price is up 82%.
Any wonder why food prices are up 40%?
Stay warm. It’s a cold one out there today. And The Federal government doesn’t care.