Jefferies' David Zervos talks how he sees Goldilocks scenario unfolding

Fed Policy & Market Liquidity - The market should take the Fed's storyline with a grain of salt, as they tend to downplay the impact of their balance sheet on risk assets [7] - The Fed's QE, even when disguised as reserve management purchases (RMPs), adds liquidity to the system and monetizes debt, which is a positive signal for risk assets [5][6] - The market reacted positively to the FOMC meeting due to the Fed's balance sheet actions [7] - The industry anticipates a more dovish Fed in the future, which is generally bullish for risk assets [14] Economic Data & Growth - Economic data is noisy and subject to revisions, with 15 million job revisions in 2023 and 2024 [2] - Despite the noise, the trend shows good growth data, high productivity, and rising real wages, though not fast enough to concern the Fed [3] - The economy may be in a Goldilocks scenario, similar to the 1990s, which is positive for equity markets [12] - The US had two consecutive quarters of 4% growth without significant job creation, indicating a productivity story [11] Market Outlook & Risks - The market expects a test for the new Fed chair, similar to what happened with previous chairs [8][9] - Lower oil prices and potentially lower mortgage rates support a bullish outlook [13] - The credibility of the new Fed makeup and potential machinations within the committee could create bumps in the market [12][14]