Central Bank Omnipotence Monitors – 9.30.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.


  • As we noted last month, a rise in cohesion after a period of waning is in our view evidence of strong (and growing) common knowledge that the Fed and fiscal policymakers “must and will” continue to take action.
  • We also think the common knowledge of excessively slow rate cuts by the Fed – again, not the personal intellectual belief in the mistake, but a belief that the market believes that the market believes it – grew rapidly once again in September.
    • We think the sharp drop in sentiment attached to this coverage is partially reflective of the language expressing this view.
    • We also think from the language of some articles that it reflects a growing common knowledge of the limited real-world impact of this stimulus.
  • You may also note that language of US markets coverage is actually more similar to discussions of ECB rates policy, negative rates and more aggressive policy. A narrative of central bank omnipotence with respect to market outcomes is alive and thriving in US markets.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Market Fragility On Show as Trade War, China Data Curb Optimism [Bloomberg]

Trump Can Battle China or Expand the Economy. He Can’t Do Both. [NY Times]

Easy Credit’s Latest Twist: Loans to Companies With No Income [American Banker]

ECB cuts rates, revives QE to lift growth as Draghi era ends [Bloomberg]

The Road to Replacing Libor Led This Finance Legend to the Best Barbecue [Bloomberg] [Ed Note: This really was in the top 10, I swear]

Central Bank Omnipotence Monitor – 8.31.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.


  • After a brief jog downward as Fed policy faded into a broader backwash of Trade War narratives, Trump’s designation of Powell as an ‘enemy’ and somewhat confused communications policy out of Jackson Hole brought central bank omnipotence narratives back to the fore of investors’ attention.
  • The rise was significant enough to make our measure of attention to central bank narratives as high as it has been since we began tracking it.
  • Along with the rise in attention, cohesion began to rise again (after a period of competing narratives) as well. We think that the change was reflective of a strong (and growing) common knowledge that the Fed “must and will” take more significant action.
  • We also think the common knowledge of excessively slow rate cuts by the Fed – again, not the personal intellectual belief in the mistake, but a belief that the market believes that the market believes it – grew rapidly in August.
    • We think the sharp drop in sentiment attached to this coverage is partially reflective of the language expressing this view.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Germany’s Scholz: Don’t expect higher interest rates for years [Reuters]

Trade War Back With a Vengeance After Jackson Hole: Economy Week [Bloomberg]

European Bonds Are Best Placed to Enjoy Spoils of a Currency War [Bloomberg]

Bond yields are on a path lower as recessions risks rise: Strategist [CNBC]

The Fed’s Stimulus Might Be Undermining Growth [Bloomberg]

Central Bank Omnipotence Monitor – 7.31.2019

Editor’s Note (8.21.2019):

We received a couple comments from readers that they found the different presentations for the charts and for the raw signal data for Sentiment and Attention confusing. Thanks! And we agree. It’s confusing.

We’ve accordingly updated July monitors below so that (1) sentiment charts show the same rolling 3-month values we provide in the data spreadsheet rather than our spot calculations and (2) the attention charts show fixed historical values as per the data file, rather than a dynamically updated series to reflect the changing long-term average. No changes to the raw XLS data.

If you would still like to see the faster/dynamic presentations of the signal data, let us know. Otherwise, our plan will be to keep it as simple as possible.


Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.

  • As expectations of a US rate cut became unanimous into late July, attention to central bank omnipotence narratives actually fell slightly from our June measure.
  • To be clear, the volume of central bank coverage increased substantially, but the language used to discuss markets began to diverge from this language.
  • Sometimes this takes place because of complacency – attention falls because common knowledge treats it as self-evident – but we don’t think that’s what happened here.
  • As we have discussed the last few months, we think that central bank narratives have begun to integrate with trade narratives in some ways that have caused pure “Fed put” discussions to fade to the background.
  • The narrative of central banks is not just “puts on financial markets” – the narrative is increasingly “tool of currency wars”, a shift that has also reduced cohesion of these narratives. It hasn’t darkened our view of the common knowledge in the Fed/ECB/Central Bank put – yet.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

One Bad Leveraged Loan Isn’t a Liquidity Scare [Bloomberg]

Asias factory activity shrinks, U.S.-China trade truce fails to brighten outlook [Reuters]

Rates Traders Are Camped on Either Side of Big Divide Over Fed Cuts [Bloomberg]

Powell Suggests Fed Embarking on 1990s-Style Mini Easing Cycle [Bloomberg]

New man on the board to clean up Deutsche Bank’s act [Reuters]

Central Bank Omnipotence Monitor – 6.30.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.

  • We have two main observations about the Central Bank Omnipotence narrative:
    • There is an emerging, global chorus of “we need to spark inflation” language that has arisen quickly.
    • Central Bank and Trade & Tariffs narratives continue to be thoroughly intertwined. We have drums pounding from every central bank that “trade risks” may justify increases.
  • Both sound to us like strong drum-beating to prep for and justify a rate cut that wouldn’t otherwise be justifiable given stronger-than-expected economic reports.
  • Separately, we also note that bank regulator activities on liquidity, student debt levels and bank stress tests have become centrally connected to the core of this narrative.
  • Regardless of what actually is the case, a narrative of “it’s time for investors to start thinking seriously about liquidity” IS emerging.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Imagine It’s Wednesday and You Trade Stocks and the Fed Just Cut [Bloomberg]

Powell Is No Longer Failing to Communicate [Bloomberg]

Strategists Say You’re Overthinking Threats to the Bull Market [Bloomberg]

A full breakdown of where the stock market stands today and whether the tariff pain is priced in [CNBC]

The Trump economy is starting to look more and more like the Obama economy [CNBC]

Central Bank Omnipotence Monitor – 5.31.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.

  • Despite the shocking rise in Trade & Tariffs attention, attention to Central Bank Omnipotence remained constant in May.
  • Cohesion, on the other hand, fell sharply, as divergent views on appropriate fed policy emerged. The existence of an emerging “we must cut rates” narrative in response to weak May equity markets alone contributed significantly to this shift in cohesion
  • While we still think the “Fed put is back” narrative is in place, it is now closely intertwined with the Trade and Tariffs issue – the “China Trade War” cluster of articles is the most central in the network graph!
    • We think there is complacency around a narrative that the Fed will respond to trade/tariff concerns with a rate cut.
    • Outside of the narrative but in our conversations with trade desks, we observe growing drumbeats around the conspiratorial view that the Trump administration is intentionally seeking to provoke a rate cut only in order to quickly resolve the trade disputes.
    • Both observations indicate to us the continued presence of a Fed Put narrative.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Corporate Bonds Aren’t Worried About a Trade War [Bloomberg]

Fed Might Shed Clues on Debate Around Rate Cut: Minutes Preview [Bloomberg]

WORST CASE SCENARIO: Here’s what it looks like if Trump starts a trade war with China [CNBC]

Trump’s tariffs put yuan shorters back in the game [Reuters]

Markets Have Misread the Fed [Bloomberg]

Central Bank Omnipotence Monitor – 4.30.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.

  • Our measures of both attention and cohesion of central bank omnipotence narratives flagged slightly in April.
  • We think this is generally the result of (1) increasing separation in policy imperatives within the narratives surrounding the major central banks and (2) the brief emergence of a new (and separate) view on a potential rate cut in the US.
  • Regardless, we continue to think that Central Bank Omnipotence is the primary governing narrative of risky asset markets in the US – with Trade and Tariffs emerging from complacency much more recently.
  • We also note the recent emergence of a central cluster relating to inequality, ‘failures of capitalism’, student loan debt and other issues making the rounds in US election politics. These are surprisingly well connected across articles in the CBO dataset. We think shifting political pressures on central bank narratives are worthy of long-term monitoring.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention Map

Source: Quid, Epsilon Theory

Narrative Attention


Narrative Cohesion


Fiat News Index


Narrative Sentiment


Key Articles

Sliding U.S. Inflation May Provoke Fed Rate Cut Later This Year [Bloomberg]

Quant Strategies Misfire as Stock Rally Pumps Up Cost of Safety [Bloomberg]

Elizabeth Warren and 2020 Democrats want to erase student debt – here’s how it could affect the economy [CNBC]

Abyss Averted in Stocks as Valuations and Rates Restore Bull Run [Bloomberg]

Bill Gross’s Successor Says Traders Are Making a Mistake on Fed Cuts [Bloomberg]

Central Bank Omnipotence Monitor – 3.31.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.

  • We continue to think that Central Bank Omnipotence is the primary governing narrative of risky asset markets in the US: The Fed Put is Back.
  • We did see a slight reduction in narrative cohesion in March. The culprits? A significant shift in overall focus to ECB stimulus, and an increase in separation between Fed, ECB and BOE language.
  • Articles are currently treating each central bank’s policies distinctly as opposed to covering “central banks” more generally as had been common.
  • As policy narratives became distinct, the narrative of EM and Frontier as the most direct beneficiaries of Fed easing strengthened significantly.
  • As we discussed in our recent ET Live! event, we believe that the narrative supporting this dynamic is likely to shift – which is presently and increasingly a contrarian view.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Narrative Cohesion

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Source: Quid, Epsilon Theory

Key Articles

Fed’s Bowman sees echoes of 1980s crisis in current farm struggles

BlackRock makes case to own more U.S. TIPS

Cramer: Powell fixed his ‘rookie mistake’ and is now on the right path with rates

‘Wall of Money’ Is Heading for Emerging Markets, IIF Says

World-Beating Frontier Rally May Move to Local-Currency Bonds

Central Bank Omnipotence Monitor – 2.28.2019

Access the Powerpoint slides of this month’s ET Pro monitors here.

Access the PDF version of the ET Pro monitor slides here.

Access the underlying Excel data here.

  • Central Bank Omnipotence narratives continued their rapid ascent in February.
  • We now think that this – more than trade and tariffs – is the primary governing narrative of risky asset markets in the US.
  • Our spot calculation in February was the single highest measure we have seen in any monitor. Our cohesion measure would describe nearly 70% of nodes as being highly connected!
  • The narrative as we see it is this: The Fed Put is Back.
  • After December’s horror at the prospect of a maybe-not-so-dovish Fed, sentiment has rebounded rapidly as well. The markets and media have happily embraced the new Fed and the new narrative of its omnipotence.
  • We also note that language used in European and UK/Brexit-related central bank commentary has converged significantly.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Narrative Cohesion

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Source: Quid, Epsilon Theory

Key Articles

PBOC Sets Up Bureau to Improve Financial Oversight

Yield-Curve Inversion Trade Seen Roaring Back After FOMC Minutes

U.S. Wage Growth Is ‘Higher Than We Think’, Fed Researchers Say

Risk Rally Spreads as Dovish Fed, Economic Data Beat Back Bears

Fed’s Clarida: Fed ‘especially’ tied to data as it pursues patient policy

Central Bank Omnipotence Monitor – 1.31.2019

Access this month’s monitor slides in Powerpoint and in PDF.

Access the data in Excel.

  • Attention to central bank narratives continued to rise in January, to nearly the highest point in the last 18 months.
  • The references to communication policy have remained, and reinforced recurring themes of ‘patience’ and ‘pause’ throughout both news and advocacy pieces.
  • In our judgment, the common knowledge that the Fed will not take any action to harm equity prices has returned.
  • We have seen a corresponding rise in sentiment, as investors and authors concerned with a mixed message from the Fed in November and December transitioned to relief.
  • The narrative proximity of Italy debt topics to US market and financial policy is new and worthy of note. We think it indicates a surprising bullishness and willingness to ‘stretch’ in language used in articles about credit markets.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Source: Quid, Epsilon Theory

Key Articles

Euro zone banks shed 30 billion euros of bad debt in Q3

The Widowmaker Trade for Hedge Funds Strikes Again

Fed Tightening Peak or Pause? For Stock Bulls, A Critical Issue

CNBC Transcript: Commerce Secretary Wilbur Ross Speaks with CNBC’s “Squawk Box” Today

ECB to acknowledge weak growth but keep policy unchanged

Investors remain on edge even after big January comeback – and that might be a good thing

Fed Makes a March Rate Hike Pause Clearer as Speakers Tout Patience

Central Bank Omnipotence Monitor – 12.31.2018

Access this month’s monitor slides in Powerpoint and in PDF.

Access the monitor values in Excel.

  • Attention to central bank narratives rose sharply in December, with a renewed attention to the Federal Reserve and its rate hike plans in particular.
  • Unusually common ngrams in the explicitly Federal Reserve- and Powell-focused articles included “communication policy” and references to the “unscripted” nature of his comments (which have largely been brought back on-script).
  • This focus on communications is exactly what we mean by central bank omnipotence – the bilateral focus on ensuring that the magic words are said.
  • The Trump sparring angle, which was surprisingly central in prior runs, has retreated.
  • The interactivity between this narrative and the trade war narrative, however, has not retreated. Trade War + Central Bank Intervention stories were among the most common and most interconnected of all in December.

Narrative Map

Source: Epsilon Theory, Quid

Narrative Attention

Source: Epsilon Theory, Quid

Fiat News Index

Source: Epsilon Theory, Quid

Narrative Sentiment

Source: Epsilon Theory, Quid

Key Articles

Morgan Stanley’s Kushma Sees Superior Emerging Bond Returns

U.S. Consumer Spending Tops Forecasts as Inflation Data Mixed

ECB Ends Historic Stimulus Push in Bet Economic Growth to Endure

RPT-ANALYSIS-Fed retunes message for 2019, opening door to ‘slow down’

Federal Reserve Officials Search for the Elusive ‘Neutral’ Interest Rate

Why it’s not time to panic over the bond market’s recession signal

Central Bank Omnipotence Monitor – 11.30.2018

Access this month’s monitor slides in Powerpoint and in PDF.

Access the monitor values in Excel.

  • While our slower smoothed measure has moved only slightly, our November point estimate for the attention around central bank omnipotence has spiked to the highest point in 2018. 
  • Like the inflation narrative structure, we have observed a new center forming around the poor performance of financial markets and the expectation that central banks will adjust their policy to protect these markets. It’s early, but it is possible that we are seeing a resurgence of a central bank omnipotence narrative that has been dormant for some time. 
  • We still note that inflation and the various risks to the European financial system remain very central to these articles as well. We have not, however, seen as prominent a “maybe ending QE in Europe isn’t such a good idea” narrative emerging there.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Narrative Sentiment

Source: Quid, Epsilon Theory

Key Articles

S&P 500 Valuation Floor Is as Wobbly as 2019 Earnings Estimates

Instant view: Investor reaction on Democrats win

Italian bond yields rise as govt digs in heels on budget

Pimco Guru Calls a Turning Point for Bond-Market Returns in 2019

Dollar hits 16-month high, yen boosted by risk-off sentiment

Wells Fargo Says Buy Now in Best Stocks Entry Point in Two Years

Central Bank Omnipotence Monitor – 10.31.2018

  • The narrative of coordinated global central banking policy has been restrained for an extended period, including most of 2018.
  • After a brief rise along with inflation fears earlier in 2018, we think stories and research have settled into clusters around three active central bank narratives with modest internal cohesion: (1) “US equity and bonds markets expect a gradual pace of rate hikes”, (2) “BOJ and PBOC are concerned about trade but markets expect a light hand of intervention” and (3) “Italy, bad debts and disappointing growth are going to drive policy for the ECB.”
  • Notably, we do not observe a dominating narrative in media that “The Fed Will Save Us” or “The Fed Must Save Us” in the same way that we observed after equity drawdowns in recent years. 
  • After entering the year with a certain indifference to central bank coverage, however, reports became increasingly dour over the course of the year. We think this is primarily a reflection of the generally greater concern by this universe for equity and bond market performance over inflation concerns.
  • We also note that “rates will help savings and attract young people back to traditional banking” stories were surprisingly central and connected to highly varied topics / clusters. This is new and worth monitoring as part of an inevitable financials rotation story from sell-side sources.

Narrative Map

Source: Quid, Epsilon Theory

Narrative Attention

Source: Quid, Epsilon Theory

Fiat News Index

Source: Quid, Epsilon Theory

Sentiment Index

Source: Quid, Epsilon Theory

Key Articles

Speculative Edge of Stock Market is Where Rate Angst Could Bite

Global Markets – Shares bound as bulls fight back at end of brutal October

Stock market bears have their best chance in nearly four months to cut into the bulls’ 2018 lead

Student debt can ruin your dreams of being your own boss

ECB’s Coeure Still Sees Need for Stimulus, Seeks Fiscal Reforms

Italy faceoff is not expected to derail the European Central Bank’s message to markets