J E R O M E P O W E L L
I love the theatrics of the FOMC meetings and subsequent Q&A sessions; there’s nothing quite so entertaining for the investor, who is infatuated with the way central bank policies impact the global economy as the jam-packed 90-minute timeframe, which started at 11 AM PST, with the release of the SEP (Summary of Economic Projections), attached HERE.
Once the document is publicly shared, the whole world knows how the Federal Reserve’s governors think about the economy, the likelihood of a recession, the conditions of lending and growth, the impact of inflation, the tight labor market and global geopolitical events.
It’s like you got a glimpse into the innermost corridors of the Federal Reserve kingdom.
Before the SEP (Summary of Economic Projections) was released, the NASDAQ 100 index was up as much as 3.00%. Upon the release, at 11 AM PST, the QQQ ETF fell by 2.3% in 15 minutes!
Most likely, what bothered Wall Street was that the downward revision of GDP projections to only 2.8%, which is historically high, but far lower than what was previously anticipated.
Powell would later address that and I’ll explain his remarks on this matter.
By 11:30 AM PST, which is half an hour after the market had a chance to examine the SEP, the QQQ was flat!
In other words, in 30 minutes, the NASDAQ 100 fell by 3%. These 100 companies have a combined market cap in the trillions, so you’re talking about hundreds of billions of dollars exchanging hands in 30 minutes.
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Powell began to tackle reporters’ questions at 11:32 AM and by 11:38, the QQQ rose back to 0.73%. He made sure the world knew that the U.S. economy is NOT AT RISK of entering a recession in the next 12 months, which I found fascinating, because my last publication, right before the meeting and Powell’s answer was that I just don’t see recession signs in the real world.
The FED raised rates by 0.25% or 25 bps and their forecast and assessment is that they’ll hike rates by an additional 1.50% this year, for a total of 7 rate hikes, contingent upon the labor market normalizing, economic conditions remaining solid and robust and on inflation remaining high, which they do expect.
Powell kept saying that in this crazy world, the FED aims to be a source of stability, not of uncertainty.
By the time he finished replying to this questions, at 11:40, the NASDAQ was up 1.00%, then the next reply sent markets up by 1.40%, 1.91%, 2.05% and 50 minutes, after Powell began taking reporters’ questions, at 12:21 PM, the QQQ was up 2.9% and closed up by 3.77%.
While my headphones listen to his words, my other screen is tuned to my portfolio and the other screens are watching precious metals and bond yields.
As I write this, gold is already back above $1,950/ounce and I think that the main takeaway from this meeting is that the FED wants to help to balance out the 1.7 job openings to each employee out there and to cool down the interest-sensitive parts of the real economy, which are borrowing and mortgages.
The recovery continues to hurt the lower classes most, because it has a clear inflationary tilt to it, but wages are rising and if you’re a valuable worker, this is exactly the type of recovery you’ve been waiting on for decades.
America continues to prove that innovation and creativeness are the true blessings of the human mind and are to be used for the benefit of the world, by building businesses and unleashing the power of the entrepreneurial machine of ingenuity.
Governments Have Amassed ungodly Debt Piles and Have Promised Retirees Unreasonable Amounts of Entitlements, Not In Line with Income Tax Collections. The House of Cards Is Set To Be Worse than 2008! Rising Interest Rates Can Topple The Fiat Monetary Structure, Leaving Investors with Less Than Half of Their Equity Intact!
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