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☆ Market Recovery Hinges on Quick Inflation Drop
▼ + stars: | 2023-01-23 | by ( Matt Grossman | ) www.wsj.com time to read: 1 min

Behind this year’s improved start for markets lies a broad wager that inflation will soon post a once-in-a-generation decline. Market-based gauges of inflation expectations project the annual pace of rising prices will tumble in the months ahead roughly as fast as during the recession that followed the 2008 financial crisis—or when Fed Chairman Paul Volcker used double-digit interest rates to crush the soaring inflation of the late 1970s.

☆ Jefferies says disinflation will be the big driver of 2023 — 20 stocks to play the trend
▼ + stars: | 2023-01-20 | by ( Hakyung Kim | ) www.cnbc.com time to read: +3 min

Disinflation — not inflation — will be a key driving force in the economy this year, according to Jefferies. Therefore, investors can find winners this year by looking at the stocks with a positive correlation to inflation cooling down. Jefferies looked at changes in inflation expectations and which equities had the highest correlation to those changes. So Jefferies reasons that these stocks will have the most to gain this year as disinflation takes over. Jefferies gave clients a list of names it believes are quality stocks trading at reasonable prices.

"Because of the lags involved, policymakers are going to face a very difficult decision about when to stop rate increases or reverse course," Romer said in a keynote address to the American Economic Association's annual meeting in New Orleans. Minutes of the most recent Fed policy meeting in December showed central bankers struggling with the risks, while economists see a high probability that the rate increases will lead to a U.S. recession in the coming year. She collaborated with Berkeley economist David Romer, her husband, to mine Fed meeting transcripts and minutes dating back to the 1940s for the review of U.S. central bank policy. Isolating the shocks, she said, allows a clearer view of how Fed rate increases influence economic output and employment, and over what time frame. Reporting by Howard Schneider; Editing by Dan Burns and Paul SimaoOur Standards: The Thomson Reuters Trust Principles.

☆ Here's why Wall Street is warning the Fed blew it on inflation and it won't save the stock market from crashing
▼ + stars: | 2022-12-24 | by ( Jennifer Sor | ) www.businessinsider.com time to read: +7 min

The Fed blew it on inflation stocks are going to have to suffer as a result. The central bank has no choice now but to keep hiking until inflation is down, experts have said. Here are five top voices in markets warning investors not to pin their hopes on a Fed put to save stocks. El-Erian has been a loud critic of the Fed's response to inflation this year, slamming central bankers for saying inflation was "transitory" in 2021. That's the cost of the Fed being late to the game, and the central bank can't back away from its monetary tightening now, El-Erian warned.

☆ No Santa rally. Stocks could soon retest their lows, strategists and analysts say
▼ + stars: | 2022-12-15 | by ( Patti Domm | In | ) www.cnbc.com time to read: +6 min

But, it also forecast a higher terminal rate — or end point for its rate hikes — of 5.1%. I think the market was going retest the lows anyway, mainly because market bottoms mostly have retests," he said. Stovall said the market could see a slight Santa rally at the end of the month, going into the beginning of January. Many Wall Street strategists expect a choppy start of 2023, with a test of the lows, then improvement in the second half. Sohn said there's still a chance for a Santa rally, but he expects it may have already happened.

☆ Fed interest rate decision spells housing trouble. It is worth it?
▼ + stars: | 2022-12-14 | by ( Allan Chernoff | Allan Chernoff Was Formerly A Senior Correspondent For Cnn | Cnbc. He Is Now Ceo Of Chernoff Communications. | ) www.nbcnews.com time to read: +6 min

Federal Reserve Chair Jerome Powell and members of his Federal Reserve Board might not be cruel and heartless people, but they are in the process of killing the American dream of home ownership for millions of families. As the central bank continues to aggressively raise interest rates in its battle to get inflation under control, the housing market is collateral damage. Had the Federal Reserve been more vigilant on its inflation watch, much of this pain could have been avoided. Already the housing market, which accounts for nearly 18% of the U.S. economy, is in a serious recession, with home sales sinking and prices beginning to fall. As the housing market slumps, the Federal Reserve is fighting a battle not only to curb inflation, but to restore its reputation as an inflation fighter.

☆ Here's everything the Federal Reserve is expected to do Wednesday
▼ + stars: | 2022-12-14 | by ( Jeff Cox | ) www.cnbc.com time to read: +5 min

U.S. Federal Reserve Board Chairman Jerome Powell holds a news conference after Federal Reserve raised its target interest rate by three-quarters of a percentage point in Washington, September 21, 2022. Kevin Lamarque | ReutersCall it a sign of the times where a half percentage point interest rate increase from the Federal Reserve is considered looser monetary policy. In 2022, they've done it five times — four times for three-quarters of a point and once for a half percentage point — with Wednesday's widely anticipated 0.5 percentage point move to be the sixth. Wednesday's meeting of the rate-setting Federal Open Market Committee will bring an assortment of moves to chew on. The 'dot plot' and the 'terminal rate'That "terminal rate" of which Masotti spoke references the expected end point for the Fed and its current rate-hiking cycle.

☆ Howard Marks says we are in the third sea change in his 53-year career on Wall Street
▼ + stars: | 2022-12-13 | by ( Yun Li | ) www.cnbc.com time to read: +2 min

Market veteran Howard Marks said higher rates and safer returns are signs of the market's third-ever sea change in his 53-year investing career. Memos from Oaktree Capital Management's Marks have gained a wide following on Wall Street, and even legendary investor Warren Buffett has said he reads them regularly and always learns something from them. Credit investors became able to demand higher returns and better creditor protections," Marks said. The investor warned that because of the sea change, investments that have worked well in the past might start to underperform in the coming years. "That's the sea change I'm talking about."

Wage gains are strong and consumption, the mainstay of U.S. economic growth, continues to increase even after adjusting for inflation. Many factors influence when and if the economy falls into recession; but invariably it will involve rising unemployment and falling consumption. They have telegraphed plans to keep raising interest rates for now as they try to cool the economy and keep prices in check. To date, Fed officials do not feel they have overstepped. "The greatest upside risk is also linked to monetary policy actions," if the Fed navigates the economy to its aimed-for "soft landing" that avoids recession.

LONDON, Dec 9 (Reuters) - With world markets in thrall to the final big three central bank meetings of a tumultuous year next week, the parallel world of fiscal policy takes a back seat. The UK's disastrously botched giveaway budget in September set out for many the limits of what's possible in a world of double-digit inflation. Loosen the public purse strings any further and the commensurate level of interest rates needed to then get inflation back to 2% targets balloons, and risks melting the economy down in other ways. OECD chart on fiscal outlook'BRUTE FORCE'All of which begs the question of whether central banks will have to conduct the inflation fight on their own. And likely severe recessions from historically modest interest rates just force central banks to quickly return to so-called quantitative easing, undermining their own longer-term inflation battle.

☆ Markets are bracing for a 'Powell recession' that could be coming soon
▼ + stars: | 2022-12-07 | by ( Jeff Cox | ) www.cnbc.com time to read: +5 min

Markets are essentially saying there will be another man-made economic contraction soon: the 'Powell recession.'" The New York Fed even has a tracker on its site that gauges the possibility of a recession by the three-month/10-year curve. As of the end of November, the inversion level implied a 38% recession chance within 12 months, according to the central bank's methodology. Markets also anticipate the Fed will approve a few more increases, ultimately taking the bottom end of the range to about 5%. Similarly, Wells Fargo economists noted that "Our own yield curve forecast signals turbulent times are ahead, aligning with our expectation for a recession starting next year."

☆ Federal Reserve chairman says a December rate-hike slowdown is possible
▼ + stars: | 2022-11-30 | by ( ) www.nbcnews.com time to read: +5 min

“It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down. Powell said Fed estimates of inflation in October showed its preferred measure still rising at about triple the central bank’s 2% target. The yield on the 2-year Treasury note , the maturity most sensitive to Fed rate expectations, dropped to about 4.47% from 4.52%. In rate futures markets, traders added to the prevailing bets that the Fed would slow its pace of rate hikes at its meeting in two weeks. Bottlenecks in goods production are easing and goods price inflation appears to be easing as well, and this, too, must continue.” But “we will likely see housing services inflation begin to fall later next year,” he said.

The war on inflation is far from won, with the Fed's preferred measure of price increases still running at roughly three times the central bank's 2% target. That's the biggest ramp-up in U.S. rates over a nine-month period since Volcker battled even higher inflation in the early 1980s. Powell, who this year marked a decade since his appointment as a Fed governor and whose second term as Fed chief extends to 2026, has overseen some divided decisions. In a best-case scenario, inflation continues to fall and Fed officials, whether hawk or dove, align around a stopping point for the policy rate that doesn't lead to a sharp rise in unemployment. Reporting by Howard Schneider; Additional reporting by Ann Saphir; Editing by Paul SimaoOur Standards: The Thomson Reuters Trust Principles.

☆ Russian oil is still flowing in huge volumes even as EU sanctions and a price cap are less than a week away.
▼ + stars: | 2022-11-30 | by ( Phil Rosen | ) www.businessinsider.com time to read: +6 min

European governments still can't agree on a price cap for Russian oil even as the December 5 deadline is less than a week away. Poland, for example, is committed to a $30 price cap. Even with a price cap of, say, $65, it's unclear whether that can really make an impact, given that Russia's flagship crude oil — Urals grade crude — is trading 20% below that level already. Despite the West's repeated condemnation of Russia and President Vladimir Putin, Russia remains Europe's largest single refined oil products supplier. A) The West agrees to a price cap above $40B) The West agrees to a price cap below $40C) The West does not agree to any price capLet me know on Twitter (@philrosenn) or email me (prosen@insider.com).

While the Fed chief did not indicate his estimated "terminal rate," Powell said it is likely to be "somewhat higher" than the 4.6% indicated by policymakers in their September projections. The Fed's response to the fastest outbreak of U.S. inflation in 40 years has been a similarly abrupt increase in interest rates. Powell said Fed estimates of inflation in October showed its preferred measure still rising at about triple the central bank's 2% target. The yield on the 2-year Treasury note , the maturity most sensitive to Fed rate expectations, dropped to about 4.47% from 4.52%. Bottlenecks in goods production are easing and goods price inflation appears to be easing as well, and this, too, must continue."

☆ Treasury yields saw their most extreme inversion since 1981, back when unemployment soared even higher than it did in the Great Financial Crisis
▼ + stars: | 2022-11-29 | by ( Phil Rosen | ) www.businessinsider.com time to read: +2 min

The 10-year US Treasury yield fell 0.78 percentage point below the two-year yield last week. That's the largest inversion since 1981, which marked the early stages of a deep recession that saw the unemployment rate reach 10.8%. Comparatively, during the Great Financial Crisis, unemployment reached 10%. The 10-year US Treasury yield fell 0.78 percentage point below the two-year yield last week, the widest gap in 41 years, the Wall Street Journal pointed out. On Tuesday, the the 10-year yield was 0.74 percentage point below the two-year yield.

☆ Cathie Wood expects a U.S. recession in 2023 that could help her fund’s performance
▼ + stars: | 2022-11-28 | by ( Carmen Reinicke | ) www.cnbc.com time to read: +3 min

But, as the central bank's aggressive rate hikes start to slow the economy and potentially tip the U.S. into a recession, Wood expects the tide to turn for her fund. "Interest rates will follow inflation," she said during a CNBC Pro Talk on Monday. When sentiment gets very bleak, or it's clear that the economy is deteriorating, that's often when the Fed would pause interest rate hikes or even begin cutting them. Biggest recession factor right now In terms of a potential 2023 recession, the biggest factor Wood sees right now is the aggressive pace of interest rate hikes to cool off hot inflation. "Taking interest rates up 16-fold, we think is a mistake," said Wood.

☆ The stock market could soar to new records in another 1982-style vertical rally as inflation continues to ease, Fundstrat says
▼ + stars: | 2022-11-23 | by ( Jennifer Sor | ) www.businessinsider.com time to read: +3 min

Stocks could rise abruptly and cause the S&P 500 to hit 4,400-4,500 by the end of the year, Fundstrat's Tom Lee said. Lee also noted that inflation was being fueled by several transitory pressures, such as supply chain issues and "revenge" spending. In 1982, the S&P 500 rebounded so sharply that in just four months it recovered from a 27-month bear market, he pointed out in a note on Tuesday. In his view, it could cause the S&P 500 to rally to 4,400 to 4,500 by the end of the year — a 12% rise from current levels. He's previously said the S&P 500 could rally to another all-time high of 4800 by the end of the year, before revising that prediction downward.

☆ A top-performing fund manager who warned of a huge collapse for stocks 6 months ago shares why he changed his tune and became bullish — and where he's investing now
▼ + stars: | 2022-11-18 | by ( James Faris | ) www.businessinsider.com time to read: +6 min

Salem Abraham, whose fund is in the top 9% of its category in 2022, is now bullish on stocks. But according to the manager of the Abraham Fortress Fund (FORTX), which is in the top 9% of its category in 2022, those worries are overblown. However, now that inflation is slowing down it would be a mistake for the Fed to raise interest rates too far, Abraham said. That explains why Argentina, which has struggled with hyperinflation for years, has seen its stock market grow instead of collapsing under the weight of higher prices, Abraham said. "The game of interest rates is run by central bankers.

The local unemployment rate is already nearly a percentage point above the U.S. average of 3.5%. "It's very premature in my view to think about or be talking about pausing our rate hikes. The target federal funds rate is now in a range of between 3.75% and 4%, the highest since early 2008. In the 1970s and 1980s, Fed Chair Paul Volcker's attack on inflation sparked a recession that pushed the unemployment rate above 10%, then a post-World War II high. "I do worry about how rates affect the economy," Bostic said at the forum.

"Ongoing increases in the target range will be appropriate," the U.S. central bank said at the end of its latest two-day policy meeting. The language acknowledges the broad debate that has emerged around the Fed's policy tightening, its impact on the U.S. and world economies, and the danger that continued large rate hikes could stress the financial system or trigger a recession. The policy decision set the target federal funds rate in a range between 3.75% and 4.00%, the highest since early 2008. The U.S. central bank has raised rates at its last six meetings beginning in March, marking the fastest round of rate increases since former Fed Chair Paul Volcker's fight to control inflation in the 1970s and 1980s. The economy, the Fed noted, appeared to be growing modestly, with still "robust" job gains and low unemployment.

Data since the Fed's Sept. 20-21 policy meeting has given little sense that inflation, which has been running at 40-year highs, is easing in a decisive way. If Powell does set the stage for smaller rate hikes in the future, it will be with language that tries to avoid any commitment and leans heavily on how the economy and inflation behave in coming weeks. LITTLE CLARITYThe rate hike the Fed is expected to deliver on Wednesday will move the target federal funds rate 75 basis points higher to a level between 3.75% and 4.00%. The policy rate has not been that high since early 2008, and the pace of the Fed's moves this year - 375 basis points of tightening after the expected move on Wednesday - is unmatched since the far stiffer rate increases former Fed Chair Paul Volcker resorted to in the 1980s. Yet some surveys and private data have showed price pressures at least on the cusp of easing, a fact that Fed officials may rely on to set the stage for more modest rate hikes to come.

☆ Fed delivers fourth 75 bp hike, signals scale-back coming
▼ + stars: | 2022-11-02 | by ( ) www.reuters.com time to read: +6 min

This statement clearly suggests input from Vice Chair Brainard and opens the door for the Fed to slow down the pace of future rate hikes. Monetary policy today is not sufficiently tight enough. We’ll know when the Fed is done tightening; they’ll tell us by simply saying that monetary policy is sufficiently restrictive. “The last thing we need to see regarding what the Fed will do in the short run is the election. If there’s a sense that fiscal policy will be more cooperative with monetary policy, it will make the Fed’s job easier.”Compiled by the Global Finance & Markets Breaking News teamOur Standards: The Thomson Reuters Trust Principles.

☆ First on CNN: Senate Democrat warns Fed it’s ‘foolish’ to keep lifting interest rates
▼ + stars: | 2022-10-27 | by ( Matt Egan | ) edition.cnn.com time to read: +4 min

But the concern is the Fed is doing too much too soon,” Hickenlooper wrote in a letter on Thursday to Fed Chairman Jerome Powell. In a bid to get inflation under control, the Fed has raised interest rates more rapidly than at any point since the early 1980s under legendary Fed chairman Paul Volcker. “I write to urge the Federal Reserve to pause and seriously consider the negative consequences of again raising interest rates,” Hickenlooper wrote, adding that families have been stung by surging borrowing costs for homes and cars. “Will raising interest rates lead to more oil, lower prices of oil, more food, lower prices of food? Former President Donald Trump repeatedly slammed Powell — his handpicked Fed chairman — for raising interest rates and shrinking the Fed’s balance sheet.

☆ The economy may be in better shape than you think...for now
▼ + stars: | 2022-10-23 | by ( Paul R. La Monica | ) edition.cnn.com time to read: +7 min

The consensus forecast from economists surveyed by Reuters is that GDP grew at an annualized pace of 2.1% in the third quarter. (This will be the first estimate for third-quarter GDP, and there will be several revisions in the coming weeks.) That also means the Fed will likely continue to sharply raise interest rates to finally choke off inflation once and for all. Those rate hikes helped cause a so-called double-dip recession, where the economy suffered two downturns between 1980 and 1982. In other words, the much-hoped-for “soft landing” for the economy could turn out to be a pipe dream.

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