The FOMC press release and subsequent press conference have spooked global markets. Badly. I don’t have a lot to say about which direction the markets are going to move over the next month or two (because I have no idea what they will do), but I have noticed one fascinating thing in the wake of revelations about the end to the Fed’s current bond-buying program. From Bloomberg:
As interest rates have climbed over the past two months, Gross has recommended buying U.S. Treasuries. In a Twitter posting June 18, he recommended buying five-year Treasuries and earlier, on June 12, he called intermediate Treasuries with yields above 2 percent a “buy.” The “Fed’s not raising interest rates for years,” he said.
I can’t help but notice the complete reversal in Gross’ position over the last two years. At the end of QE2, Bill Gross (very) publicly predicted a spike in rates as the Fed ended its long-term debt purchasing program at that point in time. Among others, Krugman disagreed with Gross publicly, and, lo and behold, rates tanked after the end of QE2. (From Simone Foxman at Quartz): This time around, it looks like Gross has reversed his position; I wonder if the memories from 2011 are playing a strong role in driving his thinking this time around? If so, he would seem to be one of the few that has actually learned something in the past 3-5 years.