BAML: Fed In Delicate Position With Wealth Effect And Rate Hikes

The wealth effect is increasingly dependent on the performance of the stock market as opposed to home price appreciation, and this is creating a quandary. The U.S. Federal Reserve is walking a tight rope, a Bank of America Merrill Lynch piece points out. Net worth-income data can be viewed from two perspectives, showing why it might want to tighten policy and why it cannot tighten. Asset values are at dangerous extremes relative to incomes, but the weak income story is precisely why the Fed . . .

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