Actionable market insights delivered weekly
Categories
AI
Asset Allocation
Big Tech
Books
Bubbles
Charlie Munger
China
Commodities
Consumer Confidence
Consumer Spending
Credit
Cycles
Debt
Discounted Cash Flow
Earnings
Economic Cycles
Employment
Equity Risk Premium
ETFs
Fed Reserve
Finding Value
Forecasting
Generative AI
Geopolicitics
Gold
Geopolicitics
Lessons
Macro/Econ
Magnificent Seven
Geopolicitics
Monetary Policy
Money Supply
Nvidia
oil
Precious Metals
Property
Quantitative Easing
Rates & Bonds
Real GDP
Real PCE
Recession
Retail Sales
Risk
S&P500
Sahms Rule
Soft Landing
Stocks
Tariffs
Trade
Trump
US 10-Year Yield
Valuations
VIX
Warren Buffett
Yield Curve
Powell’s Itchy Trigger Finger
Why does Powell think the Fed needs to cut rates? For me it’s curious. Itchy (trigger) finger maybe? What’s he so worried about? I was surprised by his (continued) dovish rhetoric and contradiction(s) last meeting. For example, on the one hand, growth is accelerating, inflation is falling and we have a strong labor market. Great! But we still need to cut rates and taper QT (soon!). I must be missing something – it’s hard to understand why the Fed is so keen to pull the trigger… what do they see we don’t?
Don’t Fight the Fed…
“Don’t fight the Fed” is a popular Wall St. adage for investors. The phrase was coined by well known investor Marty Zweig in 1970. At the time, Zweig explained the Federal Reserve policy enjoys a strong correlation in determining the stock market’s direction. Fast forward ~50 years and his theory has proven mostly correct.
The Real Surprise with Powell’s (Dovish) Statement
Investors were on tenterhooks going into today’s Fed interest rate decision. Markets were up sharply the past few weeks – expecting Powell to remain dovish. However two consecutive months of hotter-than-expected inflation prints had some thinking twice. Turns out Powell is a dove. However, he delivered more dovish ‘fuel’ for stocks that what many expected.
Will Powell Heed Volcker’s Wisdom?
Next week Fed Chair Jay Powell will deliver the FOMC’s March statement on monetary policy. Interest rates are not expected to change – however his sentiment might. When we last heard from Powell – he was dovish – igniting a rally in risk assets. However, with inflation heating up and a tight job market – Powell may perform another pivot. Markets expect three rate cuts this year – those expectations might be dialed back to just two.