Powell on the Hot Seat

Wednesday is yet another one of those media created “all-important” days this month as Fed Chair Jay Powell begins two days of testimony before Congress in what used to be called the Humphrey-Hawkins testimony named after the two Congressmen who created the act. With stocks at or near all-time highs the only precedent for an interest rate like the market is expecting at the end of the month is July 6, 1995 when stocks were also at or near all-time highs.

It’s definitely strange that with rates so close to 0%, the markets are craving more easing. Inflation is the big driver and contrary to what so many pundits predicted over and over again as the Fed was printing $4 trillion, inflation hasn’t been anything close to worrisome in more than 10 years. Europe is weak. So is China. The U.S. is softening, but certainly not weak. Beginning an interest cutting cycle with full employment and almost 200,000 new jobs a month can either be viewed as “insurance”, risky or the Fed seeing something alarming. Given the Fed’s perfect track record of never, ever accurately forecasting recession, we can all but rule out the last one.

I am eagerly awaiting the Q&A session after Powell’s opening statement which will be released well in advance of his arrival on The Hill. No doubt, President Trump’s public criticism will be questioned along with Powell’s view on whether he can be fired or demoted. Don’t expect Powell to engage.

Markets remain the same from my view. Price action, which I deemed as incomplete to the upside, should look much more complete after today, although that has nothing to do with the impetus for a decline. The NYSE A/D Line continues to score new highs and high yield bonds act well. Large declines do not begin with this set up. On the negative side, mid and small caps aren’t close to all-time highs. Sector leadership is not strong as only discretionary is at or close to new highs.

If you would like to be notified by email when a new post is made here, please sign up HERE

Paul Schatz, President, Heritage Capital
Paul Schatz, President, Heritage Capital
If you have at least $250,000 of investable assets and would like to schedule a complimentary meeting, call, or video conference with me, please click on my calendar here email me at Paul@investfortomorrow.com or call the office directly at 203.389.3553.

Speak Your Mind

*