The Market's Want "PALM" but The Fed/Treasury "Puts" Are Not Struck Here

Investors are always in need of the Perpetually Accelerating Liquidity Machine (PALM) from the Fed and Treasury however they are not getting it here. Expect lower asset prices first.

Investors are always in need of the Perpetually Accelerating Liquidity Machine (PALM) from the Fed and Treasury however the current environment of sticky inflation and huge deficit spending/borrowings is making this impossible to deliver. Expect lower risk assets prices quickly as we search for where the "put" strikes are.

Investors, aka petulant children, are always looking for help from the Fed and/or Treasury to provide more liquidity to assist their investments in a world that needs "number go up" no matter what. I have affectionately referred to this as begging for PALM, the Perpetually Accelerating Liquidity Machine.

However, given data that still shows labor market strength which throws caution on the idea that wage inflation is consistent with returning inflation to target, and given overall inflation remains well above 2% and has been re-accelerating over the last 3 months, the Fed is simply not in position to provide accommodation for the market at this time. Add to this better PMI figures today, which alleviates some concern about the April slowdown, and the Fed is simply going to have to wait. And this is the problem.