File this one under, “You Have To Be Kidding Me!”

The Dow Jones Industrial Average declined 162.77 points today. Because the financial media feels compelled to explain every jiggle in the market the folks at CNBC proclaimed the “Dow drops more than 150 points after Fed’s Powell dashes rate cut hopes.” They went on to say that on one word uttered by Chairman Powell when talking about low inflation  and that word was “transitory.” He indicated low that inflation was likely transitory. My guess is that for most people who read kortsessions.com this is not a terribly surprising revelation or something that might trigger them to flee from the market. No rate cuts and “transitory” appear to be likely building blocks to move this mole hill to mountain status. To these assertions about rate exceptions and wording I say:

“You Have To Be Kidding Me!”

Let’s try to put this rate cut speculation into perspective. The last two Fed funds rate increases took place in the fall of last year … a 25 basis point bump September 27 (range 2.00% – 2.25%) and another on December 20 (2,25% – 2.50%). These increases set the collective hair of the White House and the media (legions of pundits and talking heads) on fire. Not only that but it triggered all those computer algorithmic trading systems that are programmed to sell on any hint of higher rates into high gear. The result was a massive selloff that took the S&P 500 down almost 20% culminating in a mindless selling panic Christmas Eve. When the Fed reaffirmed that they were still “data dependent” in their decision process we began the rally that has taken us to new all-time highs.

The rate increases remained in place. The much forecast disaster didn’t happen. First quarter GDP was up 3.2% and first quarter earnings appear to be coming in better than expected. This morning we had more good news on the jobs front, “ADP private-sector job growth surges by 275,000 … “  To be fair ADP’s own economist says these numbers may be misleading on the high side. Another source quoted in the article put the real number on private sector job growth at closer to 175,00 to 200,000 per month. This is pretty much a Goldilocks economic scenario.

• You have to be kidding me if you tell me the economy needs lower rates at this time, given the trillions of dollars worth of (extremely stimulative) national debt we’ve piled on over the last decade and that we will continue to pile on as a result of our most recent tax cut.  There is no justification.
• You have to be kidding me if you or anyone were tying your investment in the market to a rate cut after this last Fed meeting. The only people talking about the need for rate cuts at this time are in the White House and media and I question their credibility on monetary policy.
• Finally, you have to be kidding me if the possibility of low inflation being a transitory phenomenon in light of the previous bullet is potentially new news to anyone.

C’mon CNBC, give your audience a break!

 

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