Stocks & Bonds Dumped After Fed’s Brainard Hawkish Comments

Brainard pulled off her historically dovish mask completely and unveiled the uber-hawk in a speech at a conference sponsored by the central bank’s regional bank in Minneapolis this morning:

“Currently, inflation is much too high and is subject to upside risks,” Brainard said, adding that “it is of paramount importance to get inflation down.”

Nothing really new there BUT, then Brainard dropped the following on the balance sheet:

To bring inflation down, the Fed will “continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace as soon as our May meeting,” Brainard said.

The Fed is “prepared to take stronger action if indicators of inflation and inflation expectations indicate that such action is warranted,” she said.

 She then went even further…

“Given that the recovery has been considerably stronger and faster than in the previous cycle, I expect the balance sheet to shrink considerably more rapidly than in the previous recovery, with significantly larger caps and a much shorter period to phase in the maximum caps compared with 2017–19.”

And that was enough to slam stocks lower…

Rapidly erasing yesterday’s exuberance…

Bond yields spiked further with 10Y hitting 2.50%…

It appears The Fed is preparing the stock market for pain ahead… will it get the message that bonds have been getting for weeks?