Well, here we are in late summer with all eyes on Jackson Hole, Wyoming, which is one of the more idyllic places in the country. Today, it has the potential of bringing a calmness or creating whitewater like turbulence that upends the stock market.

Fed Chair Jay Powell will be speaking to his colleagues and the world, giving hints at policy direction and perhaps homing in on what the Powell Doctrine might be.

A few months ago, I misread his spoken and written words as someone committed to keeping the good times going by taking bold actions. Staying ahead of the curve is a novel trait at the Federal Reserve, but I thought this chairman would be different.

There’re the unnecessary rate hikes from last year, coupled with several slips of the lip, and perhaps policies driven by emotions.

Quite simply, what we have here is a failure to communicate.

Making matters even more difficult for investors is the fact that everyone else in the Fed can’t stop talking and sharing their philosophies. The thing is that these policies are all over the map, suggesting Powell isn’t doing enough to get the Federal Open Market Committee (FOMC) members and others to buy into his vision. But then again, what the heck is his vision?

I can say this much – in the last two days, bond yields issued siren calls in response to Fed news or scuttlebutt; the 800-point Dow drubbing last Wednesday and the momentary yield inversions. The message is clear. The next policy misstep could trip a domino effect that can’t be fixed until everything tumbles.

I’m sure all the members at the Fed know the stakes, but I doubt they understand them. When I hear them talk about waiting for the data while ignoring or dismissing pockets of weakness, I worry these are academics cloistered in a world of numbers and spreadsheets. 

Yes, the economy pulled by the American consumer is strong, but it can be stronger and probably should be, considering persistently low inflation.

All the commentary and movement this week has sobered Wall Street expectations to 93.5% seeing a 25-basis point (bps) rate cut, and 0.0% looking for a 50-basis point cut. That’s a big change from a week ago when 31.5% saw a 50-bps cut. 

Fed Funds Range	August 22	August 15
200 – 225	6.5%	0.0%
175 – 200	93.5%	68.5%
150 – 175	0.0%	31.5%

Approach

We’ve put money to work in the past week, but everyone should have some dry powder.

Communication Services	Consumer Discretionary	Consumer Staples
1	2	1
Energy	Financials	Healthcare
1	1	2
Industrial	Materials	Real Estate
3	3	1
Technology	Utilities	Cash
2	0	3

Today’s Session

Equity futures were bouncing around in a narrow range but mostly higher when China announced it would levy tariffs in the range of 5 to 10% on $75 billion in US goods beginning September 1^st with some potentially implemented on December 15, 2019.

• Currently the United States has 25% tariffs on $250 billion in China exports.
• Currently China has 10% tariffs on $110 billion in US exports.

The announcement from China isn’t a surprise and is actually a measured problem; however, both nations are running out of room to only hit exports. Still, potential actions like from China including holding back on rare earth materials should be seen as a slightly positive.

Tariff Timeline

Key Dates	US Tariffs on China Exports	China Tariffs on US Exports
July 6, 2018	25% on $16 billion	25% on $16 billion
August 23, 2018	25% on $34 billon	25% on $34 billon
September 24, 2018	10% on $200 billion	5 to 10% on $60 billion
May 10, 2019	25% from 10% on $200 billion (was originally going to be hiked on January 1st)
May 13, 2019	USTR reviewing 25% tariffs on $250 billion in goods	Increase tariffs on $60 billion
August 1, 2019	Trump announces 10% on $300 billion starting September 1, 2019
August 6, 2019	US names China as currency manipulator	China suspends US ag purchases
August 13, 2019	Trump delays certain products to December 15, 2019
August 23, 2019		Announces 5 to 10% on $75 billion beginning Sept 1 for some and December 15th for others

This morning’s news should also nudge the Fed toward more aggressive accommodation but it remains to be seen if Powell and Company can actually find a way to avoid disaster rather than the old playbook of reacting to disaster.

Comments

POWELL IS A DISASTER JUST ANOTHER TRUMP INCOMPETENT LIKE SESSIONS KELLY MATTIS AND BARR ERNEST REMUS on 8/23/2019 11:43:53 AM

Why doesn't Trump Just tell companies doing bisiness in China have 1 to 2 yrs to move their supply chains to another country or face the huge tariff costs Quit screwing around with china so it could happen while he's in office they lie and cheat never chg are we going to let china get control wake up garry brewer on 8/23/2019 1:51:48 PM

New Fed Chair, C. Payne no pain, just gains. I’d make the signs for you. 🦕 CaveMan Mays, Realtor on 8/23/2019 11:19:56 PM

If the dip continues Monday what will you buy? P Conley on 8/24/2019 9:19:21 AM

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