PLW - Get Ready For 2018-Type Volatility In Stocks And Bonds

• Hiking interest rates during a supply shock might be counterproductive, but there are plenty of things the Fed has already done to push inflation higher than it would otherwise be, and it has already helped the surge in home prices and stock prices.
• The Fed intends to aggressively taper the infusion of electronic dollars into the system at a rate of $15-20 billion per month. We are already seeing the positioning for this tapering in both stocks and bonds. Increasing that taper rate can push rates higher and stocks lower.
• If the supply bottlenecks abate in the next six months, inflation should moderate, with decelerating M2 growth. In the meantime, to get a handle on the inflation situation, Powell likely wants 10-year Treasury yields higher, towards 2%. His language and his actions can do a lot to help Treasury yields reach that level.

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