I Really Didn't Say Everything I Said

Stocks have dropped as much as 4.5% since mid-way through the FOMC press conference, in which Yellen bobbled questions about "liftoff" in October, unanchored inflation expectations and the unlikelihood of additional accommodation. Swap-implied 5-year forward inflation has broken to new lows not seen since late 2008. Credit spreads continue to widen, capital investment remains stagnant, and forward earnings are flat as we near the one-year anniversary of their peak. Recession-risk is very real, and stocks won't pull out of the present correction until either the risk abates or the Fed indicates that it takes this seriously. The longer it waits, the more likely it becomes that QE4 will have to happen before "liftoff."