“What matters for investors is that any decline is likely to be unusually rapid and occur as a result of P/E compression, resulting from policy risks not weak GDP,” he wrote in a research report. “Investors need a bit more acrophobia, as our best model points to a bear market and lost decade for stocks.”Bannister argued the new Fed, under Powell, “wishes to fade the ‘Fed put,’” or the idea that the central bank would step in to prop up falling equity prices. “The cost may be a 16% P/E drop,” he wrote, referring to price-to-earnings, a popular measure of equity valuation.
Read between the lines. Under current TBTF rules the new regime appears suddenly, like the Nixon shock. It took ten years for the economy to adjust.
Powell don't like bailing the Swamp as the next bailout likely means uncoordinated default, the Nixon scenario with gold obligations.
The preference is that sandbox offer Powell a way out, a series of defaults using the auto traded pits. Most likely Trump will pull the overnight shock, sandbox must be ready.
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