Today many non-believers got religion and came to the realization that the Fed will have to raise rates a bit higher (north of 4%?) and hold them there for longer in order to fight inflation.
- A fall or winter Fed pivot feels like more than wishful thinking.
- Today was the first Chair Powell speech I’ve heard in recent memory that smacked of reality rather than some dovish Bizzaro World of the Fed’s making. It was nice to hear Powell put forth logical thinking devoid of any sugar coating as it related to the economic pain that would have to be endured in order to get the CPI back down to 2%.
- That’s likely all she wrote for the recent bear market rally which had been overdone for some time in our view.
- Before this inflation fight is over we will see a deepening recession (we are in one and there will not be a soft landing).
- The NASDAQ will ultimately bottom at around 9,000 as we wrote back in May.
See Fed Chair Powell’s speech below.