MacroVoices #550 Harley Bassman: In FED We Trust

The Federal Reserve’s recent hawkish rate hike signals a deliberate effort to regain market trust and abandon reliance on forward guidance. While inflation expectations remain anchored, market volatility reflects deep-seated concerns regarding U.S. fiscal sustainability and the government’s inability to manage a 6% deficit. Fixed income expert Harley Bassman highlights that the mortgage market faces significant negative convexity risks as the yield curve flattens, while hyperscaler debt remains fundamentally supported by strong corporate cash flows despite aggressive AI-driven spending. Addressing these systemic challenges requires structural fiscal reforms, including means-testing social programs and uncapping Social Security. Ultimately, the broader economic landscape remains dominated by a lack of institutional trust, necessitating a return to market-driven risk assessment rather than continued dependence on central bank intervention.