Back on October 3 or, as it’s now known, “long way from neutral” day, JPMorgan’s Marko Kolanovic released a short note that took a look at the market’s reaction to speeches, testimonies and press conferences from Jerome Powell.
The results did not speak highly of Powell’s communication skills, or at least not if you define “successful” communication by what happens to the S&P.
Specifically, Kolanovic found that the average negative return for the index around testimonies and other speeches from Powell was -40bps with a hit rate of 5 out of 9 (negative). On press conferences, the average negative return was -44bps and Powell’s record there was 3 for 3 (or 0 for 3, depending on how you want to conceptualize things). Here’s the chart:
(JPMorgan)
“While we acknowledge that it is not possible to attribute the market impact of each speech with certainty, simple math indicates that ~$1.5 trillion of US equity market value was lost this year following these speeches”, Kolanovic wrote.
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Marko Kolanovic: $1.5 Trillion In Market Value Was Lost This Year Following Powell Speeches
Again, that was on October 3 – the very day that Powell (arguably) set in motion the selloff and enduring volatility across risk assets that investors have been coping with for the past ten weeks.
Fast forward to Wednesday and Powell’s track record around press conferences got materially worse as stocks plunged during his remarks. It was not a good afternoon.
(Bloomberg)
Reactions across assets were fairly dramatic. The dollar snapped back, aggressively paring losses, while the curve bull flattened as long-end yields dove.
Read full coverage of the Fed decision and market reaction
‘Plain English’ People, Do You Speak It?!
Fed Hikes, Defying Markets, Trump As Dot Plot Shifts, 2019 Growth Projected Lower
Two other quick reactions worth noting – CDX IG and HY spreads widened out as the statement hit and extended that widening materially during the press conference.
(Bloomberg)
And the emerging market ETF was thrown for a loop – remember, part of the EM bull thesis for 2019 rests on the notion that a dovish pivot from the Fed will arrest the dollar’s ascent. Today didn’t do much for that narrative although the downward revision to the growth outlook and the shift lower in the dots help out a bit.
(Bloomberg)
Well, in light of all the above and just as a kind of fun followup to our earlier coverage, we thought it was worth noting that according to Bespoke Investment Group, Powell now holds the all-time record for most consecutive Fed decision days with an S&P loss.
(Bespoke)
The most “impressive” part about Powell’s record: He’s only presided over seven meetings.
In less than a year as Fed chair, he has managed to establish a record that will probably never be broken and if he keeps up this pace and somehow manages to serve his entire term without Trump trying to get rid of him, he’ll be the Wilt Chamberlain of Fed decision-day S&P losses.
somewhere, right now… pic.twitter.com/wmKPikHykX
— Heisenberg Report (@heisenbergrpt) December 19, 2018
— Heisenberg Report (@heisenbergrpt) December 19, 2018
So what this tells us is that the market wants — NEEDS — a Fed chair who is adept at blowing smoke up its ass. In a Ponzi/Madoff//debt-fueled global economy, that shouldn’t fool anyone.
“surprise” anyone.
Thank you for sharing your book.
well, would you rather have stood in a soup line after 2008? because that’s where things were headed.
No, but nothing that has transpired since 2008 has reduced the odds of the soup-line scenario. I admire Powell for being a straight talker, if not maybe too much of a cock-eyed optimistic. But what are we going to do about all the zombies on CNBC, FOX,and in the White House who say it’s a GREAT economy (so long as we can all borrow at less than 2 percent). It’s going to end badly, and we all know it. I can hear the music speeding up — better grab a seat. FWIW, I hop hedgies and real estate developers get creamed in the wipeout.
“hedgies and real estate developers” — and the LBO/PE boys. Because they’re the biggest rent-seeking bloodsuckers in the economy. IMO..
you know Powell is a PE guy, right?
There is a global threat of much worse unless a couple billion people, including ALL affluent people are going to do a ton of work for nothing.
I did not. But he’s not acting like one. He’s kind of going about his business as I would — which is probably one of many reasons why I’m not Fed chair.
I don’t need to tell you this. Go to NYC, or SF, or Austin, or Nashville, or Charleston. The bubble is big, and it need to be deflated before it become another 2008 clusterfuck.
Everybody wants to shoot the messenger. I can’t imagine the Fed Chair every being an easy job, but you’ve got to admit that Powell inherited this position with a lot of “heavy lifting” in front of him. And let’s face it, the market always wants to get it’s own way, acts like a baby and wants to be spoon “fed”. What happened to all that chatter about “the market will tank if they don’t raise rates because the fed ‘knows something we don’t.'”
As Volker is credited with killing inflation, I hope Powell is credited with killing another bubble. I’m with mfn here. My aged situation CANNOT weather another 2008. This whole thing should have been dampered several years ago. Who’s the next Dick Fuld in line? There is nothing in place to prevent another disaster.
Stock Indexes are spoiled brats crying loudly for whatever it is they desire.. In this case free cheap money comes to mind.. We the condescending parents of this mess facilitated the status quo . So the cycle is broken at last and everyone blames the messenger , in this case Powell. The soup line is longer at the end of this scenario (unless Stopped) than it was at the end of the 2008 Banker (greed ) inflicted scenario that was further facilitated by injecting excess credit (20+ returns on credit card debt) in a return of > !% for savers and a return on IOER to the same culprits who perpetrated the 2008 disaster (banks). No moral judgements here just telling it the way it appears. Does not really effect me but that is reality , none the less.