DE | Flash | Anytime | Sinai’s Bulletin Commentaries – The Fed Takes Aim! J-Hole; Reactions and Implications – 8/31/22

Posted August 31, 2022 by rvillareal

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An extremely Hawkish, intentionally so, speech by Chair Powell on Friday and a well-orchestrated chorus of similar commentaries by five Federal Reserve Presidents in J-Hole interviews with the media—wasnot really a surprise—although perhaps Chair Powell’s vehemence and purposeful zinger was kind of out-of-character.

Markets—Short-Run
All at J-Hole Dollar positive, particularly against the Yen.  Negative Fixed Income, underscoring, on average, the Bear Market in Fixed Income that will keep going for quite awhile.  This is longer-run as well as short-term.
Short-run negative equities, although the implied interest rate forecasts and extra special going out-of-the-way to tell market participants that interest rates will keep going up and stay up because of entrenched high inflation should not have been a surprise.
Short-run, after a big rally in a big Correction, taking profits and on hinted upside risks for further upside on interest rates a reason to take profits, still really not a surprise.  The extent was.  But, these days, and especially on Fed uncertainty, huge moves and volatility are part of the landscape.

Man-on-a-Mission
Chair Powell was a Man-on-a-Mission to disavow and to make clear, no surprise, higher interest rates and no pivots at any time, really hawkish, on purpose, going out-of-the-way and maybe even out of character.  The Fed will keep raising interest rates until inflation gets down, far down, for a good while, permanently so, frontloading higher interest rates, and with inflation entrenched high keeping interest rates up.  This has been the DE forecast, no surprise, but one may be to the stock market.  Keep rates up, keep rates up—messages of all Fed speakers, like a chorus, in unison.  A Baptist Sunday Sermon and response of the followers.