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Morning Commentary

The Grim Reaper

By Charles Payne, CEO & Principal Analyst
9/22/2022 9:45 AM

It was mission accomplished.  His biggest goal during his question-and-answer portion of his FOMC conference call was to get the stock market on board with Powell 3.0.  This tougher version is willing to wreck everything to undo his Powell’s own handiwork of excessive accommodation and a reluctance to even admit inflation was a problem.

He was determined not to make the same mistake as the last time around when his loose talk led the market to believe the Fed was almost done with its task of fighting inflation.  I’m not sure they get the questions ahead of time, but Powell picked the reporter from the NY Times and used her question to slam home his hawkish stance.

Thank you, and I look forward to your questions.

Q:  Hi, Chair Powell.  Thank you for taking our questions.

I wonder if you could give us a little detail around how you’ll know when to slow down these rate increases and how you’ll eventually know when to stop.

A:  So, I will answer your question directly, but I want to start here today by saying that my main message has not changed at all since Jackson Hole.  The FOMC is strongly resolved to bring inflation down to 2 percent, and we will keep at it until the job is done.

The market rally fizzled but picked up again until Powell struggled with answering whether the Fed could engineer a soft landing.  Acknowledging it would be “challenging” Powell seemed to be putting his hopes in a massive influx of folks back into the labor force.  That happened last month and less than half found gigs resulting in all six measures of unemployment moving higher.

Economic Headwinds

The market reacted harshly to the Fed’s updated Summary of Economic Projections, which sees a sharp decline in 2022 GDP to 0.2% from their June projection of 1.7%. But the unemployment rate only edges higher to 3.8% from 3.7% and inflation is higher at 5.4% PCE and 4.5% core.  The Fed doesn’t get to its 2.0% inflation target until 2025.

The committee sees a 4.4% fed fund rate at the end of the year edging up to 4.6%, which is in-line with Wall Street consensus.

Market Reaction

The stock market took it on the chin

The bond market sent a clear message acknowledging the Fed’s resolve. But it also is suggesting it would knock the economy into a deeper recession than Powell is modeling for, even if he won’t issue an official guesstimate.

Short term yields edged higher while long term yields moved lower.


The 10y2y curve steepened again, and now, at -51.5, it is the most inverted it’s been in 35-years.

The S&P 500 closed at the low of the session but flashing short-term oversold.

Key Parameters

The real action was in the VIX, which spiked to 30.00 before settling at 27.99.  It is still in an uptrend but wouldn’t be surprised if the number pulled back to low 20s.

The Greenback = The Hulk

The US dollar has become a monster, rallying to its highest level since 2004 against a basket of other currencies.  This is a serious problem for large US corporations and nations around the world with dollar denominated debt.

Part of the problem is so much of the world is sending their cash to the United States.  The Fed must see this happening and can’t be comfortable with it remaining in place for too much longer.

Be Cool Be Ready

So far, the week is living up to historic pattern I’ve written about and spoke about during this past Saturday’s call to my Hotline and Swing subscribers (if you are not a current subscriber to one of my premium services, email Info@wstreet.com).  We have raised a significant amount of cash in the model portfolio.

I think the market is oversold but will remain range bound.  Jay Powell continues to lean on incoming data, and while he says he will not overreact to a single report, the market will.

Be cool and be ready.

Keys will be the CPI report and how many folks come back to the labor force.

Portfolio Approach

There are no sector weighting changes this morning in our Hotline Model Portfolio.

Today’s Session

It kind of feels like the morning after something terrible happened and you sit on the edge of your bed mulling it over and thinking about different outcomes.  For most people in or out of the stock market, the cruel part to all of this is so much money was poured into the economy for political favor and to goose the data.

I have been saying politicians get to run on nominal numbers, but voters live with real numbers (inflation-adjusted).  Five trillion dollars came from the government last year with a simple message – shop until you drop, and if you don’t want to go to work, then we got you covered.

Now the Federal Reserve has been tasked with punishing folks for doing what the White House was asking.  Take that free money and party hard.  There is something perverse about all of this. 

Jay Powell is making it clear he is on a mission and won’t stop until certain boxes are checked off including:

This morning initial jobless claims came in at 213,000 against consensus of 217,000.  This is the seventh week in a row the number came in better than consensus.  The fed wants to see this number soar.

Equity futures moved higher after this news, which is puzzling, but nobody is taking the bait.  We are back to watching key support levels and that is the 3,666 June low for the S&P 500.


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