Morning Commentary
Here I come to save the day!
That means that Mighty Mouse is on the way!
Yes, sir when there is a wrong to right,
Mighty Mouse will join the fight!
On the sea or on the land,
He got the situation well in hand!
Originally called Super Mouse when he made his debut in 1942, the character Mighty Mouse was featured in 80 theatrical shorts, a Saturday morning cartoon show, and several revivals in the 70s and 80s.
Listening to Federal Reserve Chairman Jerome Powell yesterday, I got the impression he must have been a big fan of the show in his youth, and perhaps found it streaming somewhere. Powell admits the Federal Reserve has the same dual mandate regarding employment and inflation. However, his preamble before speaking to the press felt like someone on the campaign stump.
He did not come out to say the Fed’s easy money policies have exacerbated the wealth gap, which has exacerbated unrest in the nation. He also touched on racial injustice and fair access to credit. Of course, Powell seems determined to save everyone and stressed that point several times. The Fed is not going to let off the pedal for a long time.
Monthly purchases:
The Fed’s economic projections seem rosy compared to consensus, especially with the unemployment rate.
Economic Projections |
GDP |
Unemployment Rate |
PCE Inflation |
2020 |
-6.5% |
9.3% |
0.8% |
2021 |
+5.0% |
6.5% |
1.6% |
2022 |
+3.5% |
5.5% |
1.7% |
Wash, Rinse, Repeat
Yesterday, I was not sure why the initial rally stalled, but I wasn’t surprised. The market wants more, and Powell is ready to give it, but no one knows what they will be. However, he insisted that while the May jobs report was great, there must be more monetary and fiscal help to get the 22,000,000 unemployed as measured by the U-6 back into the workforce.
Powell still sees a nation precariously on the edge, where millions could be spying the exits from the labor force, as many more businesses are on the cusp of failing. Make no mistake. While the Fed is still fumbling around with capping yields, Powell will remain “unlimited, forcefully, and aggressively.”
He mentioned the record 128-month economic expansion that just ended, and lamented how humbling it was not to be able to achieve their 2% inflation goal. Therefore, the Fed is sticking with its symmetrical goal, which means it won’t be good enough to touch the 2% inflation. They are prepared to clear that hurdle like an Olympic athlete.
Assuming they are capable (perhaps they are fighting) and not winning a war against deflation that no one wants to talk about, Powell ultimately thinks the economy will rest on how comfortable we are living with COVID-19. On that score, I think he is right.
The biggest takeaway line: “We’re not even thinking about thinking about raising rates.”
Turbulence
They were due to come down to earth, but the air pocket in airlines hit yesterday and released the oxygen masks. A downgrade at JPMorgan Chase & Co of United Airlines (UAL) and JetBlue (JBLU) sent the entire industry looking for an emergency landing. A pullback in Boeing (BA), which is the most influential stock on the Dow, also made the session look a little worse than it was, although it was not a good day.
It was also a tough day for Energy and Financials, which took a tumble on news about higher loan loss provisions at Wells Fargo (WFC).
Technology was the only winning sector.
Keep in mind that the whipsawing of sectors can be frustrating, but it can also create opportunities.
S&P 500 Index |
-0.53% |
|
Communication Services XLC |
-0.30% |
|
Consumer Discretionary XLY |
-0.94% |
|
Consumer Staples XLP |
-0.28% |
|
Energy XLE |
-4.92% |
|
Financials XLF |
-3.74% |
|
Health Care XLV |
-0.16% |
|
Industrials XLI |
-2.39% |
|
Materials XLB |
-1.13% |
|
Real Estate XLRE |
-1.87% |
|
Technology XLK |
+1.67% |
|
Utilities XLU |
-0.58% |
Technical Watch
Monster rallies must be tested; often, the best test is to take former resistance that has to hold as new support.
Todays’ Pullback
I think there are three main issues:
1. Stocks got too expensive short term (honestly, I have struggled to find bargains recently, and took profits on some names I thought I would hold much longer and now my subscribers have 15% cash from zero last week).
Last week the big headline was the stock market had just put in the best 50-day rally in history (measuring S&P from 1957 when it moved to 500 stocks), and the market only got more parabolic after that. So there’s a good chance we have seen the best 60 days ever and that means a pullback was due (or overdue).
60 Days of Magic |
S&P 500 |
Dow Jones |
NASDAQ |
March 23 |
2,237 |
18,591 |
6,8609 |
Recent Peak* |
3,232 |
27,272 |
10,020 |
Change |
44.5% |
46.6% |
46.1% |
2. The Federal Reserve & Jerome Powell did not come through with concrete ideas about how they would provide extra help to the economy, and that is being seen as a lack of urgency unlike decisive actions taken this year. In a way, he tried to spike the ball even while laying out the case for a long throng back.
3. Waiting to see how much cash begins to circulate in the economy. We're open and everything is ticking up, but we are a long way from cash circulating in society that can generate prosperity for a wider swath of people.
Note: Some media outlets are running headlines of coronavirus spikes. I do not think this is what the market is reacting to, and it's just another attempt to derail optimism and the rally.
Comments |
So tired of the majority of the media trying to hurt this country and the people of America. Truly sickening. David G Howley on 6/11/2020 10:14:32 AM |
Your own station FOX, labeled the sell off as 'second spike'. I think this feeds the fear. Phil on 6/11/2020 10:18:41 AM |
Fed says they will just wait for thing to get better. No action beyond low interest rate to continue for a long time but they would like 2% inflation. It is up to congress to stimulate the economy. How likely is that in any election year! Business appears to be getting better but the gathering crowds for demonstrations/riots could increase the virus infection rate raising the possibility of future stay at home policies/rules. Jerry on 6/11/2020 10:23:31 AM |
Wow! My stomach feels weak. This stock market can sure change in a "New York second" as they say. Bob Blocker on 6/11/2020 2:25:18 PM |
NICE AND DIRECT NO bS michel goldschneider on 6/12/2020 11:49:46 AM |
Thank you very much - I'm sick of this. Really they can hate President Trump but it's time to stop sabotaging the stock market and sapping the public of hope and optimism. CP Charles Payne on 6/12/2020 11:58:06 AM |
Tweet |
3/28/2024 1:39 PM | Fruitful Quarter |
3/28/2024 9:50 AM | LISTEN TO THE MARKET |
3/27/2024 1:40 PM | Mostly Higher |
3/27/2024 9:32 AM | U-TURN? |
3/26/2024 1:08 PM | Everything Is Up |
3/26/2024 9:42 AM | TAPPED OUT (I HOPE YOU AT LEAST GOT A T-SHIRT) |
3/25/2024 1:33 PM | Not A Mutiny |
3/25/2024 9:35 AM | STAYING THE COURSE…BEYOND TECH |
3/22/2024 12:56 PM | Toll on Americans |
3/22/2024 9:38 AM | A TAD TIRED |
3/21/2024 1:55 PM | Building on Gains |
3/21/2024 9:30 AM | A COMFORTING FED |
3/20/2024 1:33 PM | Pivotal Moment |
3/20/2024 10:00 AM | HERE COMES THE FED |
3/19/2024 1:33 PM | Picking Up Steam |
3/19/2024 9:35 AM | RUMBLINGS IN THE BOND MARKET |
3/18/2024 1:48 PM | Mag 7 is Back |
3/18/2024 9:39 AM | THE PARTY IN SAN JOSE WILL BE LIT |
3/15/2024 1:38 PM | Realtors Settle |
3/15/2024 9:33 AM | AN UNEASY PAUSE |
3/14/2024 1:43 PM | Sticky Inflation |
3/14/2024 9:48 AM | GOING TO A GO-GO |
3/13/2024 2:16 PM | Taking a Breather |
3/13/2024 9:51 AM | ALL SO EPIC |
3/12/2024 1:42 PM | Marching Higher |
More commentary archives |
Home |
Products & Services |
Education |
In The Media |
Help |
About Us |
Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.
|