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Fed Stays Vigilant and Semi Hawkish

The Fed whacked the equity markets with the expected 50 basis point hike–but with follow up statements that they will remain vigilant and still have work to do–a hawkish tone. The S&P500 moved 2% lower at 1 p.m. central–and moved almost another point lower when Powell began to speak with a hawkish tone.

Interest rates (10 year treasury) are up 3-4 basis points–nothing too harmful.

All I can say at this point in time that those without patience in their investing are going to be disappointed–this game is going on through 2023. The next Fed meeting isn’t until January 31st/February 1st–so lots and lots of data to be scrutinized between now and then. No one can predict what we will see for a rate hike in February–assuming there is one.

For a month or two I am going to assume little upward movement in preferreds and baby bonds–just collect some fat dividends.

4 thoughts on “Fed Stays Vigilant and Semi Hawkish”

  1. Well I know one place that issued a complete turn around, throwing in the towel. Apologized that they mis read the fed. Bad news bears for us longs….

  2. “We need more people.” For me, Powell’s most important statement came at the end of the news conference. He was optimistic that prices of goods and shelter could be controlled, but kept saying that the 55% of CPE that consists of non-housing core services is not showing weakness. At the end, he said the problem was structural (which is not great when your primary tools are raising rates and QT): “ So what I meant by that with structural labor shortage is if you look at where we are now, as I mentioned, if you just look at demand for labor, you can look at vacancies plus people who racktually working and — who are actually working and take supply by labor like if you’re in the labor and looking for a job or have a job and more than four million people short. We don’t see despite very high wages and incredibly tight labor market, we don’t see participation moving up which is contrary to what we thought. The upshot is the labor market is actually — it’s three and a half million people smaller than it should have been based on pre-pandemic just assume population and reasonable growth and aging of the population, our labor force should be three and half million more than it is, and there is lots of easy ways to get to bigger numbers than that if you go back a few more years. So why is that? Part is accelerated retirements and people dropped out and are not coming back at a higher rate than expected. Part is that we lost a half a million people — close to half a million people who would have been working died from COVID and part of it is that migration has been lower. We don’t prescribe — it’s not our job to prescribe things. But I think if you ask businesses, you know, pretty much everybody you talk to says there are not enough people. We need more people. So I try to identify that in my — in the speech I gave a month ago but I stopped short of telling congress what to do because they gave us a job and we need to, you know, do that job.”

  3. Fed said the same thing they’ve been saying for months. Various analysts have been ignoring them and predicting otherwise because they want it to be so.

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