Regular readers will know that I have been relatively constructive about stock prices longer term, though I am bracing for further short-term volatility. However, the level of anxiety among my readers is high and I have had to play a game of whack-a-mole with bearish themes (as an example see Why China won't blow up the world (this year)).
One of the more recent explanations for the current bout of stock market weakness is that the Federal Reserve is engineering an extraordinary level of tightening, as measured by the Shadow Fund Funds rate (SFF). Such Fed action, it is said, is creating a high degree of stress in the financial markets and causing stocks to tank and risk appetites to shrink (annotations are mine).
How concerned should we be about this development?
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