Seeking Redemption, Jerome Powell Blindsides Skeptics
Jerome Powell came into the January Fed meeting holding the all-time record for most consecutive Fed decision days with an S&P loss.
That amusing stat garnered quite a bit of attention last month after ol' Jay fumbled what we now know (thanks to the December minutes) was an easy handoff in the post-meeting presser.
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Jerome Powell Is The Wilt Chamberlain Of Fed Decision-Day S&P Losses
Long story short, "plain English" struck again on December 19 and at the worst possible
The (market’s) bitch is back!
I love you, Mr Heisenberg, I really do, but nobody – man or machine alike – gave two goddamns about the vocabulary, grammar, syntax, or diction coming out of Powell’s word hole. It was always about policy. When the Fed skewed the slightest bit ‘oh gawd don’t hurt me Goldman and CNBC hawkish, the markets hated it. Now that Trump, Jim Cramer, and Government Sachs ‘put’ Powell back in his place, the markets love it. That is it. No need to overcomplicate. “Everything should be made as simple as possible, but no simpler.” Charts and squiggles and investment banker notes and forward guidance and two-way communications all be damned. ‘Hawkish bad. Dovish good. More dovish better. Japan a good starting point.’
“… gave two goddamns about the vocabulary, grammar, syntax, or diction coming out of Powell’s word hole.”
I love you Harvey, but you are 100% incorrect. As in, you couldn’t be more wrong if you tried. where do you think the dovishness comes from, homie? if he doesn’t open his mouth (either literally or through the statement), there is no dovishness. dovishness has to be communicated. and when you say “investment banker notes”, what exactly do you think Goldman is?
and this: “it was always about policy” makes zero sense.
there was no “policy” change today. none.
markets were pricing a 1% (that’s “one”) chance of a rate hike. there was no policy change. not to rates and not to the pace of balance sheet rundown.
it was literally all about the words. again: your comment is wrong in every possible sense of the word “wrong”
soz.
Well, the Fed was increasing rates…and now they are not. That is a policy change. The markets didn’t price that in. They made a prop bet. If they had priced that in, then markets wouldn’t have soared 1.5% today. The Fed was rolling off Treasuries and MBSs on autopilot for the foreseeable future, and now they aren’t. That, too, is a policy change. Those are two dovish pivots.
In terms of communication, Powell could have opened a box and released pigeons and left the stage and the markets would have soared. If he played Prince’s “When Doves Cry,” markets would have tanked. They only care about low interest rates and liquidity boosts. You can say that in Basque, Morse code, with hand puppets, or Legos. Nobody cares.
Your love does make my day, though. 🤗
There was no policy change today. Period. Rates were unchanged. The pace of balance sheet runoff was unchanged.
Again, you are wrong. All that changed was the language. Both in the statement and in the presser. That is the reality of this situation. What you are saying is fantasy.
Also, your allusion to Goldman makes no sense. Goldman was persistently hawkish (predicting quarterly rate hikes in 2019 all the way up through December even when the market had completely priced them out).
This is also wrong: “The markets didn’t price that in.”
Do you have a bloomie? if so, look up the market pricing for today’s meeting. Markets did price it in.
It was absolutely, 100%, for sure, no doubt about it, NOT the pause that caused the rally. it was the statement language and the presser. Period.
Nobody expected a rate hike today. Nobody at all. Except maybe you. Again: LOOK AT THE MARKET PRICING AHEAD OF THE MEETING. There was no hike priced in. You are stone, cold wrong.
Like kids snatching candy from the bowl when they are not supposed to…….the inevitable excuse when finally apprehended “well everybody does it” Then after a while somebody refills the bowl and it goes on and on.
With Powell and the Institutions of Government , generally, the bar is set very low.. ….Like with the kids the complacent onlookers ignore the activity having been desensitized by the frequency and it’s brazen nature. Happens everywhere and all the time.. Inevitably volumes are written explaining and debating all this…soon to be forgotten by the very next event of any consequence, probably something contrived to distract the same onlookers…. Life goes on…!
He veers too hawkish, reverses tone, then too dovish.
This is not what I expected from Powell. Realizing markets are turning and then changing Fed language? Sure, I think that was achieved already. But to lean so far dovish feels like a betrayal of what he’s supposed to stand for. Market is now dictating policy again.
Like seriously, markets were already recovering this month. Wasn’t enough to just say “ok so in light of recent developments, we will halt hikes for the foreseeable future, and we could slow the pace of balance sheet normalization later this year”.
As an experienced market participant, you would think he understood short term market volatility is perfectly normal. I would also have expected someone of Powell’s stature to understand the market turmoil of recent months was healthy. I know we like to kid ourselves, but most of us know deep down that valuations are stretched. Asset inflation as a policy objective was achieved. Financial engineering has expanded multiples beyond anything thought reasonable 3 years ago. The economy isn’t really feeling any pain (although shutdown may change that), unemployment is low, and inflation subdued. This was the perfect opportunity to shake out loose hands, remove excesses, and redirect capital to productive assets.
Wtf is he trying to do? Engineer the bubble to continue growing in size? He is already limited in policy tools, and he’s removing the little ammunition that he has, so when things start to go bad, everything will topple. All he had to do was just continue the language from the last presser while leaving the door open for changes to balance sheet normalization.
The market needed a forward looking Fed Chair who’s familiar with cycles in markets as well as the economy. What we got is someone who wants to act steadfast but can’t take the pressure and then shoots in the opposite direction. He’s literally causing bouts of volatility and uncertainty in the system.
that was not meant as a reply