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2023-03-09

All must Stop investing in US mkt

Why Investors Must Stop Ignoring Fed Chair Powell's Warnings

SummaryThe Federal Reserve indicated higher rate hikes than the market expected.Inflation and jobs r

Why Investors Must Stop Ignoring Fed Chair Powell's Warnings

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Disinflation, or a slowing rate of inflation, would imply interest rates would not rise as fast. In its last meeting, the Federal Reserve raised interest rates by 25 basis points, sharply below the several consecutive 75 bp hikes.Despite key economic reports that would sway the Fed’s policy decisions, market pundits inferred a Fed pivot for 2023. Fed Chair Powell repeatedly warned markets that they should not expect interest rates to stop rising or start falling.Powell’s testimony shocked the markets, if you consider a stock index drop of up to 1.72% for the Dow Jones Industrial Average (DJI) a plunge.Stock markets on March 7, 2023:<img src=\"https://static.tigerbbs.com/0d41273a9fa18cd70325f81b79009823\" tg-width=\"506\" tg-height=\"104\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>seekingalphaIn the table above, the S&amp;P 500 (SPY)(SPX) (SP500)fell by 1.5%, bringing the index close to lows not seen since January.What is the one thing that Chair Powell said that scared markets?Readers may feed Powell’s testimony into aword cloud to visualize the takeaways that strip out the context.<img src=\"https://static.tigerbbs.com/33a21cfee05fab536b2e4cd4aad4909f\" tg-width=\"640\" tg-height=\"321\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>monkeywordIn short, Powell said there is little sign of disinflation. The latest data came in stronger than expected, “which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.&#34;Interest rates will more likely rise by 50 bp at the Fed’s next meeting on March 15-16, 2023. Markets expected a 25 bp hike, a pause, and then a pivot.The chances are very low that rates will decline this year, as explained here. I previously wrote that “it will start cutting rates no earlier than 2024.” I also expected a 0.25% increase. Unfortunately for equity investors, the central bank considered both theJanuary 2023 CPI of 6.4%and the personal consumption expenditureincrease of 5.4% Y/Yas too high.In the testimony, Powell acknowledged that PCE prices slowed, thanks to lower energy prices in January and easing supply chain bottlenecks. Those external events were not enough to convince the Fed of meaningful disinflation. The core services excluding housing account for more than half of core consumer expenditures. The Fed needs proof of lower inflation here. This will require job losses (“softening in labor market conditions”) and a mild economic slowdown (GDP growing at a below-trend pace of 0.9% last year).No Goldilocks Moment for The FedIn the story &#34;Goldilocks and the Three Bears,&#34; Goldilocks sought the perfect porridge, chairs and beds. The Fed’s semiannual monetary policy report to Congress is not a Goldilocks moment.To achieve its dual mandate of (1) promoting maximum employment and (2) stable prices, the Fed will announce more rate hikes in its next policy meetings than markets expect. It requires price stability to achieve sustainable market conditions. OnFriday, March 10, 2023, the Bureau of Labor Statistics will likely report another strong job report.The tight labor market is so tight that there are only 1.9 job openings for every unemployed individual. This is near the all-time peak recorded a year ago when the economy was hot. Wage gains slowed slightly in recent months, but the Fed said it is above consistent with a 2% inflation and current productivity trends.Trade the Lower Disposable Income TrendsPowell said that strong wage growth benefits workers only if inflation does not erode it. Stock traders are already betting on the impact of lower disposable income on demand. Consumers may cut non-essential spending on streaming. Netflix (NFLX)hiked prices in 2023, which will raise margins but hurt revenue. Its free $6.99 amonth ad-supported tiermay not offset 13% in customer losses after Netflix chargesextra for password sharing.The premium on NFLX stock is unattractive when interest rates rise. Investors earn 5.30% on a risk-free 6-month Bill (US6M). Conversely, Netflix shares risk correcting to the sector median. Its price-to-earnings multiple is double that of the sector:<img src=\"https://static.tigerbbs.com/b617ead5c34dbebe0e8c3c54fa12995e\" tg-width=\"578\" tg-height=\"410\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Seekingalpha premiumThe electric vehicle market could face a sharp downturn in demand. Consumers will cancel their Lucid Motors (LCID) or Rivian Automotive (RIVN) orders. Used car pricesmay drop by 10% in 2023, encouraging consumers to buy a cheaper gas-powered car than an EV.According to Seeking Alpha’s quant system, both stocks have a “Sell” warning.<img src=\"https://static.tigerbbs.com/0b6170eaf20a1df7617fb9f5949ff58e\" tg-width=\"387\" tg-height=\"162\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>Seekingalpha premiumWatch Jobs Report This FridayMarkets should brace for a strong February 2023 jobs report. Monetary policy has a lag that has yet to act on current economic activity and inflation. The economy is likely so strong that it will add far more jobs than the Fed expects. These figures, before the next Fed meeting, will support the bank’s decision to raise rates by 0.5%.Your TakeawayMarkets will need a more convincing narrative to reassert bullish sentiment. The jump in Treasury yields sent the yield of the 2-year and 3-month T-bill to a 52-week high.<img src=\"https://static.tigerbbs.com/d94bd92913c4905d991373a483b4bb72\" tg-width=\"629\" tg-height=\"263\" referrerpolicy=\"no-referrer\" width=\"100%\" height=\"auto\"/>seekingalphaThe widely traded 30-year bond (TLT) risks retesting the $100 support. This ETF will not reward investors until just before the Fed signals a rate cut. The Fed interpreted the recent set of economic data points - jobs and inflation - as risks for price stability.</body></html>","source":"seekingalpha","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Why Investors Must Stop Ignoring Fed Chair Powell's Warnings</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWhy Investors Must Stop Ignoring Fed Chair Powell's Warnings\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-03-09 17:45 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4585578-investors-stop-ignoring-fed-chair-powell-warnings>Seeking Alpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummaryThe Federal Reserve indicated higher rate hikes than the market expected.Inflation and jobs reports support higher rates.Investors should increase cash allocation.Throughout this year, the ...\n\n<a href=\"https://seekingalpha.com/article/4585578-investors-stop-ignoring-fed-chair-powell-warnings\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{".DJI":"道琼斯",".IXIC":"NASDAQ Composite",".SPX":"S&P 500 Index"},"source_url":"https://seekingalpha.com/article/4585578-investors-stop-ignoring-fed-chair-powell-warnings","is_english":true,"share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","article_id":"1192494548","content_text":"SummaryThe Federal Reserve indicated higher rate hikes than the market expected.Inflation and jobs reports support higher rates.Investors should increase cash allocation.Throughout this year, the stock market overcame the worry of persistent inflation. Disinflation, or a slowing rate of inflation, would imply interest rates would not rise as fast. In its last meeting, the Federal Reserve raised interest rates by 25 basis points, sharply below the several consecutive 75 bp hikes.Despite key economic reports that would sway the Fed’s policy decisions, market pundits inferred a Fed pivot for 2023. Fed Chair Powell repeatedly warned markets that they should not expect interest rates to stop rising or start falling.Powell’s testimony shocked the markets, if you consider a stock index drop of up to 1.72% for the Dow Jones Industrial Average (DJI) a plunge.Stock markets on March 7, 2023:seekingalphaIn the table above, the S&P 500 (SPY)(SPX) (SP500)fell by 1.5%, bringing the index close to lows not seen since January.What is the one thing that Chair Powell said that scared markets?Readers may feed Powell’s testimony into aword cloud to visualize the takeaways that strip out the context.monkeywordIn short, Powell said there is little sign of disinflation. The latest data came in stronger than expected, “which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated.\"Interest rates will more likely rise by 50 bp at the Fed’s next meeting on March 15-16, 2023. Markets expected a 25 bp hike, a pause, and then a pivot.The chances are very low that rates will decline this year, as explained here. I previously wrote that “it will start cutting rates no earlier than 2024.” I also expected a 0.25% increase. Unfortunately for equity investors, the central bank considered both theJanuary 2023 CPI of 6.4%and the personal consumption expenditureincrease of 5.4% Y/Yas too high.In the testimony, Powell acknowledged that PCE prices slowed, thanks to lower energy prices in January and easing supply chain bottlenecks. Those external events were not enough to convince the Fed of meaningful disinflation. The core services excluding housing account for more than half of core consumer expenditures. The Fed needs proof of lower inflation here. This will require job losses (“softening in labor market conditions”) and a mild economic slowdown (GDP growing at a below-trend pace of 0.9% last year).No Goldilocks Moment for The FedIn the story \"Goldilocks and the Three Bears,\" Goldilocks sought the perfect porridge, chairs and beds. The Fed’s semiannual monetary policy report to Congress is not a Goldilocks moment.To achieve its dual mandate of (1) promoting maximum employment and (2) stable prices, the Fed will announce more rate hikes in its next policy meetings than markets expect. It requires price stability to achieve sustainable market conditions. OnFriday, March 10, 2023, the Bureau of Labor Statistics will likely report another strong job report.The tight labor market is so tight that there are only 1.9 job openings for every unemployed individual. This is near the all-time peak recorded a year ago when the economy was hot. Wage gains slowed slightly in recent months, but the Fed said it is above consistent with a 2% inflation and current productivity trends.Trade the Lower Disposable Income TrendsPowell said that strong wage growth benefits workers only if inflation does not erode it. Stock traders are already betting on the impact of lower disposable income on demand. Consumers may cut non-essential spending on streaming. Netflix (NFLX)hiked prices in 2023, which will raise margins but hurt revenue. Its free $6.99 amonth ad-supported tiermay not offset 13% in customer losses after Netflix chargesextra for password sharing.The premium on NFLX stock is unattractive when interest rates rise. Investors earn 5.30% on a risk-free 6-month Bill (US6M). Conversely, Netflix shares risk correcting to the sector median. Its price-to-earnings multiple is double that of the sector:Seekingalpha premiumThe electric vehicle market could face a sharp downturn in demand. Consumers will cancel their Lucid Motors (LCID) or Rivian Automotive (RIVN) orders. Used car pricesmay drop by 10% in 2023, encouraging consumers to buy a cheaper gas-powered car than an EV.According to Seeking Alpha’s quant system, both stocks have a “Sell” warning.Seekingalpha premiumWatch Jobs Report This FridayMarkets should brace for a strong February 2023 jobs report. Monetary policy has a lag that has yet to act on current economic activity and inflation. The economy is likely so strong that it will add far more jobs than the Fed expects. These figures, before the next Fed meeting, will support the bank’s decision to raise rates by 0.5%.Your TakeawayMarkets will need a more convincing narrative to reassert bullish sentiment. The jump in Treasury yields sent the yield of the 2-year and 3-month T-bill to a 52-week high.seekingalphaThe widely traded 30-year bond (TLT) risks retesting the $100 support. This ETF will not reward investors until just before the Fed signals a rate cut. The Fed interpreted the recent set of economic data points - jobs and inflation - as risks for price stability.","news_type":1},"isVote":1,"tweetType":1,"viewCount":477,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":27,"xxTargetLangEnum":"ORIG"},"commentList":[],"hasMoreComment":false,"orderType":2}