U.S. real rates above 2 percent could drive stocks down, Luke Gromen warns - Traders Union
U.S. real rates above 2 percent could drive stocks down, Luke Gromen warns - Traders Union
Source: Traders Union
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DW NOTE
Gromen's threshold matters because real rates already cleared 2% in August — the 10-year yield is at 5.31% against 3.4% headline CPI, a 191-basis-point real rate. If equities haven't collapsed yet, either his framework is wrong or the lag is longer than the market expects. The Fed has held rates at 3.75% through an oil shock that pushed PPI to 5.44%. That's the tell: they're willing to tolerate producer inflation to avoid financing cost spiral on $35 trillion in debt.