Federal Reserve Chair Jerome Powell placed his put in stocks while saying there is none. When he doubled down today on a more dovish approach to the economy, Powell claimed the Fed is not designing interest rates to keep the market climbing. If that is true, recession must be near:
Fed delivers a “double-barrel dovish blast”
The Fed sees recession dead ahead. You have only that choice in how to interpret this because the Fed made a major course correction in late December, which instantly saved the crashing market, and today it announced it fully intends to stay the new course while stating that had nothing to do with the market.
The Fed’s major course change, then, can only be due to seriously deteriorating economic conditions. The course shifted from an expected 3-4 increases in 2019 of its targeted Fed-funds rate to 1-2 interest increases; and it shifted its balance-sheet-reduction from auto-pilot at full speed to manual pilot under a careful speed watch. Today it doubled down on all of that.
If such a face-losing change of course is due only to economic data, the Fed has surely put us all on economic watch (sort of like hurricane watch or storm watch). After all, auto-pilot was supposed to be as boring as “watching paint dry” according Janet Yellen when she started us down that path.
The myopic market loved this today, and the Dow leaped instantly up about 150 points to close 435 points up for the day!
Read the rest here: The Great Recession