Sport Investors League
  • Politics
  • Stocks
  • Investing
  • Business

Sport Investors League

  • Politics
  • Stocks
  • Investing
  • Business
Stocks

New Highs Coming or Will We Collapse? What Say You, Fed Chief Powell?

by admin July 27, 2024
July 27, 2024
New Highs Coming or Will We Collapse?  What Say You, Fed Chief Powell?

This will be one of the most interesting quarters in recent memory. The Fed has got to choose its poison. Do they stand pat once again next week, leaving rates “higher for longer” and awaiting more data? Or do they finally take the step that just about everyone is waiting for them to take and start a cycle of interest rate cuts to save our economy from spiraling lower?

One side is the inflation side, which perhaps is not convinced that we’re out of the woods. The other side, which I’m on, is watching closely as initial economic warning signs begin to emerge. This side believes that the inflation job is essentially done, while waiting too long to lower rates may unnecessarily result in an upcoming recession and, potentially, a big market decline.

Pick your side.

Listen, there are genuine arguments on both sides. I would definitely be much more comfortable, however, debating the merits of cutting rates NOW. First, the Fed has called for a sustainable path toward its 2% core inflation target at the consumer level. I can’t help but look at the Core CPI chart below and wonder how much more sustainability the Fed needs to see before attacking the slowing economy. Remember, the Fed has two mandates, not one. It strives to maximize employment and stabilize prices. It’s spent the past few years doing the latter, and it’s time to focus on maximizing employment. Here’s the current Core CPI picture:

The one-month rate of change (ROC) of Core CPI has been trending lower since peaking in early 2021. That’s three years of a sustainable decline. I’m really not sure how much longer the Fed needs to see it drop unless they’re literally waiting for it to hit 2%. Furthermore, the last reading in June showed the lowest reading yet—just 0.006%, less than one-tenth of one percent. The last two months’ Core CPI readings, annualized, is just 1.32%. Again, what do we need to see?

Many argue that the economy has remained resilient and doesn’t need any help. That is partly true, but the fed funds rate was not hiked multiple times due to a weak economy. Rates were hiked to stave off further inflationary pressures. Once those inflationary pressures are subdued, there’s no reason to keep rates elevated. It only risks the Fed’s other mandate to maximize employment.

To give you one example of the beginning of economic weakness, check out the history of initial jobless claims and their tight correlation with previous recessions:

The 2020 recession is in red because it’s the oddball. That recession had little to do with systemic economic weakness and instead occurred out of our first pandemic in 100 years. The other six, however, were directly tied to economic weakness. Before the start of each of those six recessions, the initial jobless claims began rising. Rising claims lead to a rising unemployment rate, which is a harbinger of poor economic activity to come.

Folks, we’re at a major crossroads here. I’ve maintained my steadfast secular bull market position since 2013, briefly turning bearish as corrections and cyclical bear markets unfolded. Currently, I believe we remain in a secular bull market. The Fed, though, needs to cut rates now, or my long-term position may change. Powell, forget about the ghost of inflation and address the problem at hand, before it’s too late!

Whether we can (1) withstand Q3 weakness and return to all-time highs quickly or (2) spiral lower into year-end will depend a great deal on Fed action or inaction. And, like I said, maybe they’ve sat on their hands too long already. There are critical technical, historical, and economic signals to be aware of to navigate what we’re about to go through. It’s important enough that I’ve decided to host a webinar for our EarningsBeats.com members on Saturday morning at 10:00am ET, “Why The S&P 500 May Tumble”. This session is FREE to EarningsBeats.com members, including FREE 30-day trial subscribers. I believe you will appreciate this walk through history and understand the implications of Fed actions should you attend. For more information and to register for this critical event, CLICK HERE.

I hope to see you there!

Happy trading!

Tom

0
FacebookTwitterGoogle +Pinterest
previous post
Recovery Rally In Stock Market Offers Hope: What You Need To Watch
next post
S&P 500 Breaks Key Trendline as Growth Stocks Plunge

Related Posts

SMCI Stock Rebounds: Why Its SCTR Score is...

May 15, 2025

DP Trading Room: Defensive Sectors Lead the Pack

February 26, 2025

Can the S&P 500 Rally Without Tech?

November 29, 2024

Top Techniques for Finding Strength in Sectors

December 12, 2024

Bristol Myers Squibb’s Rising SCTR Score: Seize the...

February 28, 2025

SCTR Report: American Tower is Breaking Out Now;...

October 16, 2024

Sector Rotation Model Flashes WARNING Signals

June 12, 2024

An Awesome Breakthrough in S&P 500 and Nasdaq:...

July 6, 2024

My Downside Target for the S&P 500

March 11, 2025

From Summer Doldrums to Year-End Surge: How to...

May 31, 2024

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent

    • Bernie Sanders ripped after clash with GOP audience member over gov’t shutdown blame: ‘Just got wrecked’

      October 17, 2025
    • Trump reveals Arc de Triomphe-style monument for America’s 250th anniversary

      October 17, 2025
    • No 2 House Democrat says healthcare drives party’s strategy as shutdown heads into next week

      October 17, 2025
    • SOUTHCOM commander announces sudden retirement amid Trump drug war in Caribbean

      October 17, 2025
    • White House considers cash rewards for Gazans aiding search for slain hostages

      October 17, 2025

    Categories

    • Business (1,119)
    • Investing (3,270)
    • Politics (3,990)
    • Stocks (1,155)
    • About us
    • Contact us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: sportinvestorsleague.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 sportinvestorsleague.com | All Rights Reserved