Market On Open - Thursday 2 May

Market On Open - Thursday 2 May
“The Least Weasel”. Photo by Brent Jones / Unsplash

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by Alex King

Yesterday we noted the Fed signalling that inflation was NOT GETTING WORSE. Later in the day they signalled that MAYBE IT IS. You couldn't make this stuff up!

The FOMC decision and subsequent Chairman Powell speech yesterday - and assorted Nickileaks posts through the day to set the tone - basically said the following:

  • Yes, inflation is proving tricky to cram back down to 2%
  • No, we won't accept a higher baseline rate of inflation, 3% no way!
  • Yes, we have to hold rates higher for longer
  • No, we aren't putting rates up
  • Yes, the most likely next move is not a hike
  • No, we aren't not going to buy more Treasuries
  • Yes, we are slowing the rate at which we sell Treasuries and other assorted government-y stuff

Now, I am no macro or bond or Fed expert - for that you should read Yimin Xu's Macro Musings series here in this service (he got a nice quote in the Fed coverage yesterday - right after Powell himself! - here ) - but even my simple equity brain was able to infer the following from the Powell speech:

  • Inflation is getting worse but it's a bit scary to think about that, so we won't.
  • We can't cut rates because then the poors will riot because $6 gas
  • We can't hike rates because then the bigs will riot because SPX3500
  • Sooooo.... we are going to slow QT and do a little bit of QE on the down-low (see squirrelly wording about re-investing principal payments received)
  • Yippee! Poors won't know what is going on and the $6 gas probably isn't until 2025-26, by which time anything could have happened and riots in a couple years, that's not something we have to worry about right now, but, bigs will be happy because we just eased without making it clear we eased! Now, where's my memorial library project got to?

The market yesterday did its predictable thisaway thataway thing. We'll see which direction next. Logically up (because easing) but who really can say save for actually watching prices?

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