Operating at the Intersection of Technology and the Capital Markets
Tag: Chairman Powell
The NASDAQ Composite has had a nice little run, up more than 9% year-to-date. However, I would exercise caution ahead of Tech earnings and the Fed's January 31st / February 1st FOMC meeting. We have written on numerous occasions that we expect management teams to take a conservative approach to 2023 Revenue and EPS guidance. … Continue reading Technology Stocks Are Not Yet In The Clear
The Fed's current projections are more realistic than those made in September but continue to reflect a degree of wishful thinking. Unemployment Rate & Real GDP. It is difficult for me to believe that Real GDP Growth will be flat in 2023 at 0.5% as the Unemployment Rate increases from 3.7% to 4.6% over the … Continue reading Fed Projections: Too Optimistic
The Fed's FOMC statement reads that the Central Bank anticipates that its Fed Funds Rate will need to go higher in order to return CPI to 2%. The Fed plans to continue with QT in-line with its previously communicated path ($60 billion per month cap on Treasuries, $35 billion per month cap on Agency securities). … Continue reading Fed Funds Will Go Higher. QT Will Continue.
Our view is that it will be difficult for the Fed to take a dovish position with CPI above 7% given a CPI target of 2%. Further, the entire Treasury yield curve remains in negative territory. Recall that Powell wants to see positive real rates across the yield curve as he said in his September … Continue reading The Fed Can’t Afford To Be Dovish
The Fed reduced its Treasury and Government Agency security holdings by $32.9 billion over the week ended November 30th. The Fed has reduced its balance sheet holdings by $79.7 billion over the last 4 weeks. Fed Balance Sheet – Treasuries: The Fed’s Treasury security holdings were $19.6 billion lower over the last week and $60.0 … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
"Did Powell just say that the pace of Fed Funds Rate increases may slow? Let's run stocks higher through year-end, fundamentals be damned!" I've never seen a more lazy equity market in my life. Fundamentals have not mattered since the COVID lockdowns and Fed policy matters far too much. The market is to blame as … Continue reading Stocks To The Moon, Fundamentals Be Damned
The Fed's tightening is as much about its quest to regain credibility as it is about curbing inflation. The fact that prices for goods and services started to climb in 2020 and have persisted higher for two years is no surprise. The Treasury (subsidized by the Federal Reserve) mailed trillions of freshly-printed U.S. Dollars (helicopter … Continue reading The Fed’s Quest To Regain Credibility
We believe the Fed will continue to raise rates into next year regardless of where the CPI comes in over the next several months. Today the market is trading up as the headline CPI print came in lower than consensus estimates. We believe the market is missing the bigger picture. This CPI / Fed Funds … Continue reading Where We Differ With The Market
What is the logic to suggest that a "short & shallow" recession is likely? Isn't it more likely things will get worse before they get better? The U.S., Europe and China are experiencing economic slowdowns. The U.S. is in a recession if you believe the Atlanta Fed (GDPNow for Q2 2022 is -1.6%. See GDPNow … Continue reading A Short & Shallow Recession?
It would seem to us that the Fed is stalling its QT effort. Inflation will not materially decline unless the Fed materially shrinks the money supply. Looking at the Fed's balance sheet it appears the Fed has stalled its QT effort, especially when one considers that the Fed had planned to reach a $95 billion … Continue reading The Fed Is Blinking
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