"The Fed Will Not Blink": Kenny Polcari Says A 100bps Hike May Come As Soon As July
38 year market veteran Kenny Polcari offers his thoughts on Powell's testimony yesterday and today - and where the Fed is headed.
Friend of Fringe Finance and well known financial news contributor - as well as 38 year veteran of markets Kenny Polcari has been kind enough to share his most recent thoughts on the market with our readers.
I’ve been lucky enough to be friendly with Kenny for about a decade now, and he was the first guy to ever take me on what I can only describe as an unauthorized tour of the NYSE trading floor, where I got to personally tell several confused specialists and market makers that the Chinese names they were trading were frauds that didn’t even exist.
The tour didn’t last as long as I would have liked, to say the least. But I’ve always appreciated Kenny’s willingness to welcome people into his busy world for nothing in exchange, and his decades of experience, which gives you a pulse on markets that only time can help you recognize.
For those who aren’t familiar with Kenny or don’t recognize him from TV, he is Managing Partner of Kace Capital Advisors, Chief Market Strategist at SlateStone Wealth, and a Managing Director at Campfire Capital a boutique investment bank. He started his career on the floor of the New York Stock Exchange (NYSE) as an institutional broker back in the early eighties when the march of electronic trading was already taking its first steps, and the great bull was first learning to run.
The post has been lightly edited for punctuation and grammar.
Kenny On Jerome Powell’s Testimony Yesterday & Market Pricing
“An economic downturn is certainly a possibility, we are not trying to provoke and do not think we will need to provoke a recession, BUT we do think it’s absolutely essential to curtail inflation.”
– Jerome Powell, Wednesday June 22, 2022
Need I say more? They do not need to provoke a recession, but it is essential and, by the way, it is already here!
Jerome Powell takes to Capitol Hill and tells the Senate that “steep rate hikes could tip the US economy into a recession” and went onto say that navigating a ‘soft landing’ would be very challenging! Bingo! He followed that up with this:
“The other risk is that we would not manage to restore price stability and that we would allow this high inflation to get entrenched in the economy, we cannot fail on that task. We have to get back to 2% inflation……ongoing rate increases will be appropriate to cool the hottest price pressures in 40 years. Inflation has obviously surprised to the upside over the past year and further surprises could be in store. We therefore need to be nimble in responding to incoming data and the evolving outlook.”
Ding, ding ding! He has now opened the door to include a full 100 bps rate hike in July - it is now out there ‘officially’ in the global public square, it had to be.
Now, investors have to consider the real possibility of a 100 bps hike as soon as July and as a result will (and should) price it in - and if it happens (just like June’s 75 bps hike) then markets will be prepared and, if it doesn’t happen, investors will have to then decide if that is (was) a good decision – based on all the data points available.