Aligning trading positions with Fed balance sheet projections could be the holy grail to achieving alpha returns. A thought-provoking piece in Zerohedge notes that Quants have discovered a guaranteed source of alpha, which is to trade based on the growth of the Fed balance sheet. In other words, the disconnect between financial asset prices and the fundamentals are a continuing theme. Fed balance sheet projections continues to be a...
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All eyes are on the Fed’s balance sheet. With the Fed fund rates near-record low of 1.5 to 1.75%, any meaningful rate cuts to stimulate investment and the economy have been exhausted. Think about it. A quarter-point rate cut has not got much vavavoom. So has the Fed run out of firepower, as many commentators believe? The answer is no if you think that the Fed’s balance sheet can keep expanding. Theoretically, the Fed,...
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