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Fed Chairman Powell, the tribe has spoken




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Chairman Powell, bring me your torch The tribe has spoken (Getty stock photos / royalty-free)

Not China.

Not geopolitics. [1

9659003] Not the Midterms and the upcoming Blue Wave, all of whom insist, will sack President Trump next year in an impeachment scenario and push back his agenda.

The 600-point slide last Wednesday and the 400+-point slide at the Thursday is one man only and one institution: Jerome Powell, chairman of the Federal Reserve, when he speaks, the market crashes.

To take the buzzword from host Jeff Probst of the reality show Survivor: "Chairman Powell , the tribe has spoken. "19659003]

Jeff Probst, host of the survivor. In Survivor: Wall Street against Washington, the tribe has merged and the Wall Street tribe has chosen Jerome Powell from the island. (CBS photo via Getty Images)

Market reactions last week appeared to be driven primarily by the perception of a potentially more aggressive Fed and not a sudden deterioration in data, Barclays Capital economists said in a statement to customers on Friday ,

Fed rates range from a very low and acceptable 2% to 2.25%, but Powell reiterated last Wednesday that a tight labor market was a cause for concern. Although inflation has slowed somewhat, it has risen 2.2% yoy so real interest rates are still close to zero. US interest rates are likely to reach only 3.25% next year, so if inflation stays at around 2%, US real rates will only be 1.25%. This leaves no room for a Fed taper in the event of a recession. The Fed usually lowers interest rates by 500 basis points in a downward cycle. That would put real interest rates in negative territory.

President Trump sounded the alarm anyway. He even considers 1.25% too high.

"It's a correction that I think is being caused by interest rates from the Federal Reserve," Trump said last Wednesday. "Interest rates are rising much faster than many people expected, and I think what they're doing is wrong."

Anything that jeopardizes its history of economic growth is negative for the president. He has dealt with the economy and immigration, but the immigration reform has brought nothing. There is no southern boundary wall in the works.

The economy and new trade agreements with Mexico, Canada, South Korea and Japan are all positive for the president. A bull market that began in March 2009, Obama's first year in terms of quantitative easing and falling interest rates, is helpful to the Trump Republicans in the middle ages. It is also helpful for Trump in 2020, provided he is running for reelection.

Jerome Powell, chairman of the US Federal Reserve. Lately, when he speaks, the market crashes. Photographer: Andrew Harrer / Bloomberg

See: The Fed is a Greater Headwind than a China Trade War – Forbes

US. Growth in the third quarter is still at 3.2%, exceeding almost any developed market economy. That has not changed, though the Fed has been moving all year round.

"I think the market is getting higher," says Byron Wien of Blackstone. He is bullish on stocks, arguing that the S & P 500 will be on its way to 3,000 by the end of the year.

Many investors think the Fed's inflation mandate has been achieved. Inflation is under control. Why go hiking?

"Cooling gains should be enough to calm fears of an overly aggressive Fed," says Stifel's chief economist Lindsey Piegza. "The market is not so confident that the (Fed Open Markets) Committee will pay due attention to the recent decline in inflation and stay on a" gradual "path."

Charles Evans, President of the Federal Reserve Bank of Chicago: rates higher and higher and higher. And if that's not enough, they'll go up again. Photographer: Daniel Acker / Bloomberg

The Dow erased some of its losses on Friday but ended the week up more than 1,000 points at 25,339.

Recent comments from members of the Federal Open Markets Committee, including John C. Williams (NYC), Robert Steven Kaplan (Dallas), Patrick Harker (Philadelphia) and Charles Evans (Chicago) signal more hawkishness with a pledge to over interest rates Neutral raise before taking a break. The neutral rate was 3% at the end of September.

Three more rate hikes have already been priced in, the next is expected in December. Powell reiterated last week that another 50 points above the neutral rate could be justified, causing the Dow to spin.

Jamie Dimon, Chairman and Chief Executive Officer of JP Morgan Chase. The economy is good. A restrictive Fed … not so good. Dimon expects Treasury rates to be at 4%, but believes that the economy is strong enough to handle higher capital costs. Photographer: Daniel Acker / Bloomberg

If the Fed overshoots the neutral rate, the theoretical level supposedly offsetting growth with low inflation, Powell is ready to make 3% a moving target.

"Maybe we have the neutral rate," he says. "Maybe we'll increase our neutral rate estimate and we'll just go there or maybe we'll keep our neutral rate here and then go one or two rate hikes beyond that."

On Friday, Jaime Dimon, the CEO of JP Morgan, said he already targets a 4% Treasury yield and is not all worried. For him, the economy is strong enough to cope with it.

Long-term investors are also not too worried. BlackRock CIO Richard Turnill said last week, "The economy is strong, Fed or no Fed."

"We expect this will take a few weeks," said Gerry Frigon, chief investment officer at Taylor Frigon Capital Management of San Luis Obispo, California. "Some of the reasons given – China's trade wars, higher interest rates, the midterm elections – are anything but a start, in our view, and we would not respond to any of these issues," he says. "We will not allow the trends of day traders to dictate our long-term investment decisions."

Still, Wall Street agrees with one thing: Along with the statement last week that we are a "long way" from the neutral Fed is the biggest risk to the economy.

"

Chairman Powell, bring me your torch .The tribe has spoken.

Not China.

Not geopolitics.

Not the midterms and The Pending Blue Wave Everyone insists on forcing President Trump into an impeachment scenario and changing his agenda next year.

Last Wednesday's 600-point slide and Thursday's 400+ point chute focus on one man and one Institution: Jerome Powell, chairman of If He Speaks, Crashes the Market.

To take the buzzword of host Jeff Probst of the reality show Survivor: "Chairman Powell, the tribe has spoken."

Jeff Probst In Survivor: Wall Street against Washington, the tribe has merged and the Wall Street tribe has voted Jerome Powell off the island. (Photo by CBS via Getty Images)

The Market Trick Last week's news seemed to be driven mainly by the perception of a potentially more aggressive Fed, rather than a sudden delay According to Barclays Capital's clients on Friday, Barclays Capital's economists announced that Fed rates were very low and acceptable at 2%. up to 2.25%, but Powell reiterated last Wednesday that a tense job market is a cause for concern. Although inflation has slowed somewhat, it has risen 2.2% yoy so real interest rates are still close to zero. US interest rates are likely to reach only 3.25% next year, so if inflation stays at around 2%, US real rates will only be 1.25%. This leaves no room for a Fed taper in the event of a recession. The Fed usually lowers interest rates by 500 basis points in a downward cycle. That would put real interest rates in negative territory.

President Trump sounded the alarm anyway. He even considers 1.25% too high.

"It's a correction that I think is being caused by interest rates from the Federal Reserve," Trump said last Wednesday. "Interest rates are rising much faster than many people expected, and I think what they're doing is wrong."

Anything that jeopardizes its history of economic growth is negative for the president. He has dealt with the economy and immigration, but the immigration reform has brought nothing. There is no southern boundary wall in the works.

The economy and new trade agreements with Mexico, Canada, South Korea and Japan are all positive for the president. A bull market that began in March 2009, Obama's first year in terms of quantitative easing and falling interest rates, is helpful to the Trump Republicans in the middle ages. It is also helpful for Trump in 2020, provided he is running for reelection.

Jerome Powell, chairman of the US Federal Reserve. Lately, when he speaks, the market crashes. Photographer: Andrew Harrer / Bloomberg

See: The Fed is a Greater Headwind than a China Trade War – Forbes

US. Growth in the third quarter is still at 3.2%, exceeding almost any developed market economy. That has not changed, though the Fed has been moving all year round.

"I think the market is getting higher," says Byron Wien of Blackstone. He is bullish on stocks, arguing that the S & P 500 will be on its way to 3,000 by the end of the year.

Many investors think the Fed's inflation mandate has been achieved. Inflation is under control. Why go hiking?

"Cooling gains should be enough to calm fears of an overly aggressive Fed," says Stifel's chief economist Lindsey Piegza. "The market is not so confident that the (Fed Open Markets) Committee will pay due attention to the recent decline in inflation and stay on a" gradual "path."

Charles Evans, President of the Federal Reserve Bank of Chicago: rates higher and higher and higher. And if that's not enough, they'll go up again. Photographer: Daniel Acker / Bloomberg

The Dow erased some of its losses on Friday but ended the week up more than 1,000 points at 25,339.

Recent comments from members of the Federal Open Markets Committee, including John C. Williams (NYC), Robert Steven Kaplan (Dallas), Patrick Harker (Philadelphia) and Charles Evans (Chicago) signal more hawkishness with a pledge to over interest rates Neutral raise before taking a break. The neutral rate was 3% at the end of September.

Three more rate hikes have already been priced in, the next is expected in December. Powell reiterated last week that another 50 points over the neutral rate could be justified, causing the Dow to spin.

Jamie Dimon, Chairman and Chief Executive Officer of JP Morgan Chase. The economy is good. A restrictive Fed … not so good. Dimon expects Treasury rates to be at 4%, but believes that the economy is strong enough to handle higher capital costs. Photographer: Daniel Acker / Bloomberg

If the Fed overshoots the neutral rate, the theoretical level supposedly offsetting growth with low inflation, Powell is ready to make 3% a moving target.

"Maybe we have the neutral rate," he says. "Maybe we'll increase our neutral rate estimate and we'll just go there or maybe we'll keep our neutral rate here and then go one or two rate hikes beyond that."

On Friday, Jaime Dimon, the CEO of JP Morgan, said he already targets a 4% Treasury yield and is not all worried. For him, the economy is strong enough to cope with it.

Long-term investors are also not too worried. BlackRock CIO Richard Turnill said last week, "The economy is strong, Fed or no Fed."

"We expect this will take a few weeks," said Gerry Frigon, chief investment officer at Taylor Frigon Capital Management of San Luis Obispo, California. "Some of the reasons given – China's trade wars, higher interest rates, the midterm elections – are anything but a start, in our view, and we would not respond to any of these issues," he says. "We will not allow the trends of day traders to dictate our long-term investment decisions."

Still, Wall Street agrees with one thing: Along with the statement last week that we are a "long way" from the neutral Fed is the biggest risk to the economy.


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