Category Fed Reserve

Fed Gets Green Light… Market Thinks Otherwise

The market ripped higher on news of a softer-than-expected wage inflation report. But haven't we seen this script before? Markets have a recent history of front-running the Fed... only to be bitterly disappointed. From my lens, nothing in this print changes the script for the Fed. And markets are not set up to hear that...

5 Charts to Shape 2023

Inflation, rate hikes, the US dollar and bond yields all shaped how things traded in 2022. What will shape investment strategies and sentiment this year? From mine, look no further than what we see with employment, wage inflation and economic growth. And from there - how this dictates the pace and duration of Fed tightening.

Powell’s Single Focus

During 2022 - the market obsessed over one thing - inflation. How high? How fast? And for how long? That concern is now largely behind us... however investor's gaze is about to pivot from CPI worries to employment (specifically entrenched wage growth). If Powell is to be successful in winning the war against structurally entrenched inflation - he needs to bring wage growth down to 2%. Today that figure remains above 5.0%. That's going to take time... and is the market potentially caught offside?

Is the Market Fighting the Fed?

The market and the Fed are at odds. In short, equities don't believe what Powell is saying. The market is betting the Fed is wrong and will be cutting rates by the second half of 2023 - where the 'dot plot' of 5.0% is a dream. My take: choose to fight the Fed at your own peril. Typically it doesn't work out well.

A Textbook Reversal

We've experienced a 16% rally off the October lows. And it's happened in short time. Why? Traders see a far more dovish Fed on much lower inflation / coupled with a mild recession. I'm not buying it... not yet.

Powell Pop… Don’t Get Too Excited

The market is popping on the hope of a more dovish Fed going forward. Chairman Jay Powell gave the market 'hope' by saying the Fed is likely to moderate the pace of hikes. But is that 'really' that bullish?

A Framework when Thinking about the Fed

How fast? How high; And for how long? That's the framework when thinking about the Fed's policy moves. From mine, the market are offside in terms of how high and particularly how long. What we do know is the pace will slow.

Powell: ‘A Long Way to Go’

No pause. No pivot. It's enough to make "doves cry". However, Fed said there will be a time when they will slow down rate hikes. But we're not there yet... expect rates to be higher than previously expected.

More Tricks than Treats?

The market is up around 11% from its recent lows. Its rallying on the hope of a dovish Fed. My advice is tread carefully... you might get 'tricked' rather than 'treated' this Halloween. The upside does not handily outweigh the downside risks. Bear markets are known to do just that...