Yields are starting to tumble, TLT is moving up, the CMC Fed Funds Futures Probability is showing that 50 basis point rate hike is completely off the table for march and odds just went up for a 0 rate hike. Why is this happening? 2 new forces have just entered the market, instability which is obviously emanating from the Ukraine conflict and greater inflation in energy costs which will translate to greater inflation in most consumer goods.

Both of these forces lead the Fed in contradictory directions. If they want to keep the dollar lower, protect banks, keep credit spreads low, keep liquidity flowing, plug holes in balance sheets that may be related to Russian banks; they need to loosen or at least not tighten. But they'll need to do this in the face of increasing inflationary pressures coming through the commodity markets. 

The markets believe the Fed has their back, they are clearly betting that the Fed will prioritize market stability over inflation concerns. But are they right?

Sure over the last 10 years the Fed has indeed had your back, we got the Powell put in 2018, rates were very low for a long time. But here's what you gotta consider: politics is in play, inflation has risen to the number one issue in the poles, things are getting real for voters. Republicans are breathing down the Democrats neck on inflation. The midterms are coming up and the Democrats face a high chance of at least losing the house or the senate. They need inflation addressed, pressure will be applied. The Democrat's voter base is definitely not disproportionately concentrated in wealthy asset owners who benefit from inflation and loose monetary policy.

Let's also keep in mind that the Fed has their own political pressures, they are acutely aware that they run the risk of being demonized or being used as scapegoat. It would be easy to have populist accusations begin to percolate that they are more worried about keeping rich people rich than the poor and middle class who are being inflicted by massive year-over-year price increases in food, housing and energy.

There is a real chance the "fed put" may not come. Or if it does come it's not coming soon. Eventually they'll succumb if things get bad enough and the consensus sees economic deterioration in jobs, GDP, defaults, credit spreads, crashing home values, sure they'll pivot. But they won't pivot before the pain gets here.  They may not have the ability to preemptively anticipate financial instability risks and react ahead of time. The public, companies and politicians may need to see those in real life before the Fed can tell the middle class: sorry about your rent shooting up but I gotta save your job first.