The markets are still anticipating rate cuts and I think there’s a chance that Powell doesn’t give it to them. If there’s a hawkish pivot coming from the Fed, I’d expect stock prices to start falling again and the signals may be sensing some of that. If there’s one thing that I think the market is really underestimating right now, it’s the impact of Japan on the global economy.

The fact that there’s such unanimity right now in the idea of loosening monetary policy conditions at this time suggests that someone knows something that they’re not saying out loud yet. I think that investors, despite their outward bullishness, may be realizing that there are some underlying concerns with how central banks are handling the current situation that could turn things south pretty quickly.

I think we could be entering a short-term reflationary, long-term deflationary environment. The one thing that BoJ has done this week by essentially keeping conditions ultra-loose with significant wage pressures looming is establish a catalyst for a global systemic risk event. I think there’s a high risk that the BoJ eventually makes an aggressive and unexpected move to try to respond to inflationary pressures at some point.