Market On Open - Thursday 2 May
DISCLAIMER: This note is intended for US recipients only and, in particular, is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Cestrian Capital Research, Inc., its employees, agents or affiliates, including the author of this note, or related persons, may have a position in any stocks, security, or financial instrument referenced in this note. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice. Companies referenced in this note or their employees or affiliates may be customers of Cestrian Capital Research, Inc. Cestrian Capital Research, Inc. values both its independence and transparency and does not believe that this presents a material potential conflict of interest or impacts the content of its research or publications.
Inflation IS GETTING WORSE But NO-ONE CARES. YET.
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?
So let's check in on equities, bonds, volatility, oil and sector specific-ETFs. You do have to pay for that stuff, sadly. I mean, it's a lot of work and all. So if you’ve yet to sign up? You can do so from the links below.
Choose “Market Insight” if you want our notes only; choose “Inner Circle” if you want those investment notes, plus real-time trade alerts, live weekly webinars and recorded videos, and of course a wonderful, live, 24x7 investor community chat service. Monthly and annual subscriptions available - right here.