Fed Chairman Powell and the Great Inflation Indecision

In Tuesday’s presser with Federal Reserve Chairman Jerome Powell, he basically said what he typically says.

And it sounds like he expects ‘higher for longer’ with interest rates, but perhaps maybe not as risks remain to economy… and then again inflation is too sticky.

Here are some of my thoughts on the overall macro and technical picture with the stock market and economy.

  1. All stock market indices are below their 50-DMA and in caution phases.
  • Inflation-yes stickier but not everywhere-grains down, sugar down, lumber down, gold, coffee, cocoa, oil, copper, silver up…
  • But silver still well underperforming gold. Gold is right now more of a flight to safety. What will get gold to 3000-besides war?
  • If silver at least starts to show us it can begin to outperform gold in the gold to silver ratio. For now, the theme is potential stagflation given weak manufacturing and housing, strong but nuanced labor stats, inflation pocketed, govt debt/spending soaring, geopolitical uncertainty.
  • This type of disjointed inflation read most likely leads to some rate reduction-if LaGarde does it first as she suggests-which in turn could lead to:
  • A buy in emerging markets
  • Topping action in the US dollar
  • Long bonds finally bottoming out -but will that be good for the market? Here is where potential recession comes into play.
  • Junk bonds flashed the warning on this sell off as they always are best risk on/off indicator-now coming into major SUPPORT-which if breaks below will send stocks lower still. If these levels hold and HYG gets back over 76 will start to nibble some stocks  

Meanwhile, back to the future…

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  1. Consumer shifting spending-more on personal care than travel or homes-this is our vanity trade (based on the new diet drugs becoming more mainstream) and we still like:
  2. Norvo Nordisk
  3. ELF
    1. AbbVie
  4. But not buying until market stabilizes 
  • With money in fixed income, consumer is making more in the short-term interest-bearing assets than what the consumer debt is-only exception is new mortgages.
  • Solar-unless oil takes out current highs, could still flounder-but at some point, TAN around 40 looks very cheap and appealing.
  • Bitcoin-rangebound-must hold 60k and get back over 65k-the halving event appears priced in. Overall, gold is well underperforming in the longer term but near term is more of a store of value. While gold took out the 2021 highs-bitcoin has not.
  • MY LONG-TERM prediction-gold has more upside but then in 2025 peaks out for a very long time and bitcoin resumes the future store of value.

Twitter: @marketminute

The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.