The Fed Will Soon Raise Their 2% Inflation Target
The Fed Will Soon Raise Their 2% Inflation Target
A 50 bps hike "screams desperation", says Kenny Polcari.
But for Jerome Powell’s cleverly worded change to the opening of his statements yesterday, I don’t feel any different about the trajectory we are on than I did yesterday, when I wrote this piece:
Though I usually won’t syndicate my friend Kenny Polcari twice in one week, I wanted to offer up his take on yesterday’s hearing, which also gives his thoughts on macro going forward in general. So today I’ve provided his analysis and outlook into the rest of the trading week. In general, Kenny believes (1) the Fed is going to raise their inflation target from 2% and (2) a recession is already a guarantee (stop me if you’ve heard this one before).
For those who aren’t familiar with Kenny or don’t recognize him from TV, he is Managing Partner of Kace Capital Advisors and Chief Market Strategist at SlateStone Wealth. 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.
Here’s his take on markets heading into the Thursday, March 9, 2023, trading day:
The post has been lightly edited for punctuation and grammar.
Powell Day Two, Nothing New: Rates Are Going Higher
As Jerome Powell took the stage on Capitol Hill (again) yesterday, he reminded us that he is keeping his options ‘open’ (again). His comments reminded us that the Fed is behind the ‘8 ball’ even after a year’s worth of rate increases.
The Dow traded lower (again), losing 60 pts, but surprisingly the S&P gained 6, the Nasdaq added 45, the Russell ended flat and the Transports gained 80 pts. This morning, there has been a reconsideration of his comments and futures are all lower.
In addition to Powell, we saw ADP employment come in stronger than expected at 242k new jobs (or as I like to say – restored jobs). Last month’s reading was also revised up and the JOLTS Job Openings Survey rose by 300k more jobs than expected, coming in at 10,824k versus the expected 10,546k. But to be fair, even the higher number was lower than last month’s upwardly ‘revised’ reading of 11,234k.
This hot economic data offers little to no alternative for the Fed chair to turn dovish anytime soon. And so stocks struggled to hold on, even after Powell assured us that there has been no decision yet on whether they go 25 or 50 bps on March 22, 2023 and he offered up hope that he (they) are not trying to force a recession. Now that’s funny. When did Powell become a comedian?
We are well beyond wondering whether or not we are going into a recession. The only question is what will give way first.