What the Post-Debt Ceiling Landscape Looks Like

Andrew Giovinazzi

Yo Pit Crazies,

The last 3 years has been an impressive action by the Federal Government, and all of it … has been wrong.

Blow out spending for two years, mandates, lockdowns, school closures, and massive inflation – the list goes on and on. Turns out we didn’t need any of it, and the vaccine turned out to be a mixed bag.

The vaccine got the market rallying and capital markets functioning. On that score there was a cost, but it might have been worth it.

The politicians tried, and now we know why the Founding Fathers gave as little power as possible unchecked. It could go bad and stupid at the same time. Jefferson never wanted a Central Bank.

We could be at the end of this cycle. The Fed is near the top of raising, and stocks are back to where they were last summer. Most of the COVID stuff is done. The only damage the Fed can do now is lower too fast. I won’t hold out hope, but they might have a shot at doing the right thing.

With the government out of the markets, what happens?

VIX Gets Smoked!

The chart below is a 5 year look at the VIX. I leave it to you to figure where the US Gov started intervening in the cap market in a big way recently:

I give J-Pow one more raise and then interest rates will be over inflation. Traders and the market can deal with that. While the US Gov is on target with massive spending, rates will not go down – traders know this.

What that will give us is less special market machinations from Uncle Sam. In general, that’s a good thing because like I said, the politicians rarely do the right thing.

My only question is if it’s this cycle or the next cycle for Jul VIX. Note below realized vol is getting back to pre-Covid levels in the SPX.