‘Encouraging Things’.

So Wednesday is in the books, and for my money, the highlight came when Donald Trump spoke at the swearing in of Jesus freak and soon-to-be worst Secretary of State in history, Mike Pompeo.

Here’s the clip that finds Trump explaining how people are going to be doing “very encouraging” things they “don’t even know about” yet:


My hot take:

Speaking of “very encouraging things” that “nobody knows about”: signs of inflation. The Fed sees some of them, but not enough to deliver a whole lot for the hawks in the May statement.

Here’s the red line for anyone who missed it:


If anything, that’s slightly dovish and it seems to suggest they’d be willing to tolerate some overshoot on the inflation front which isn’t surprising given that they tipped as much in March.

“This doesn’t seem like an overtly hawkish shift in language overall,” and “it wasn’t as hawkish as markets had expected” Wells Fargo’s Erik Nelson noted.

“[The Fed] did little to forewarn that a rate hike was imminent in June” and while PCE may run hotter than 2% this year, “policymakers appear to be trying to tamp down expectations that such a run would warrant a materially faster pace of rate hikes,” CIBC noted.

“They also said — and I think what the market is reacting to — that market-based measures of inflation expectations remain low”, SocGen’s Subadra Rajappa told Bloomberg in an interview, adding that “part of our expectation was that if the Fed were going to guide the market to expect a total of four hikes this year, we might start getting a hint of that in the May statement.”

“This statement offers little to hawks in the near term”, Bloomberg’s Cameron Crise noted.

And on, and on. You get the idea. Markets reacted accordingly, with the dollar falling:


Session lows for USDJPY:


10Y yields receded:


This came following the highly anticipated Treasury refunding announcement and amid the usual cacophony re: a looming supply/demand shift in the bond market (more here).

Needless to say, gold got a boost from the dovish interpretation of the statement. “Gold had a modest relief rally toward $1,310 from $1,306 as the Fed acknowledged higher inflation but very little change otherwise,” BMO’s Tai Wong wrote this afternoon.


And crude similarly jumped as the dollar fell:


But the dovish spin on the statement that found expression in other assets didn’t find its way into stocks or actually, it did, but the knee-jerk was fleeting and ultimately the bottom fell out (maybe once everyone realized that a June hike is still fully baked into the cake). Futures tell the story:


This is a truly egregious piece of shit right here:


And this is not a piece of shit (turns out Apple isn’t going of business after all – who knew?):


Finally, for your moment of zen: When it comes to the whole “against all enemies foreign and domestic” thing, we would say this to Pompeo: “Watch out! The calls are coming from inside the house!”

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