"The first question to ask is, when does the US dollar become a US problem? Nobody knows, but more price action of the kind we've been experiencing will eventually get the Fed to back off," Wilson said.īut investors shouldn't put too much stock into a potential pivot by the Fed, he added. Just like the Bank of England had to intervene last week by purchasing long-dated bonds to stem soaring gilt yields, the Fed will also likely have to intervene in a similar fashion, whether that means a pause in rate hikes or full-out quantitative easing.
It appears increasingly likely that the Federal Reserve will pivot away from its currently hawkish monetary policy as global US dollar liquidity is now in the "danger zone where bad stuff happens," Morgan Stanley's Mike Wilson said in a Monday note. The bank said global US dollar liquidity is now in the "danger zone where bad stuff happens."īut stock investors shouldn't be too excited by any Fed pivot because an earnings recession is imminent, Morgan Stanley said. The Federal Reserve will likely follow in the Bank of England's footsteps and pivot, according to Morgan Stanley.
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