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Thursday markets: Fed to hike interest rates in March?

Written By | Feb 23, 2017

A protester greets Fed Chair Janet Yellen between innings at Jackson Hole. 2014. (Screen shot from Bloomberg video)

WASHINGTON, February 22, 2017 – Our columns have been appearing haphazardly over the last several days, though it’s not for lack of trying. Given the Tower of Babble that the Washington bureaucracy, the lamestream media and associated Soros-supported crazies have been building since November 9, 2016, it seems the current globalist game plan is to thwart everything President Trump plans to do to halt America’s rapid decline into oblivion.

As far as the Fed’s part in this, the U.S. central bank’s next threatened interest rate increase could be closer than most financial analysts think. Or at least that’s what Janet Yellen wants us to think.

Documents released Wednesday show that Federal Reserve officials spent their meeting three weeks ago consumed with the changes brought on by the new Administration in the White House – spicing their most recent minutes by strongly hinting that another rate hike could be just around the corner since the U.S. economy has suddenly been made great again. Notes CNBC:

“The Federal Open Market Committee – the central bank’s policy-making arm – discussed at length the impact from lower taxes and regulations and higher domestic spending under President Donald Trump, according to minutes of the Jan. 31-Feb. 1 session.

“The meeting was the first since Trump took office, following his stunning November election upset. The president’s name was never mentioned in the minutes, but the broad brushes of his agenda show up often.

“Members reported hearing higher levels of confidence in the business community. And they predicted that the expected increase in economic growth related to Trump’s policy proposals could push the Fed into action.

“‘Many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon’ if data on jobs and inflation are ‘in line with or stronger than their current expectations,’ or if the risk increased that the Fed might overshoot its goals, the meeting summary stated.

“Jobs numbers indeed have been solid and the Consumer Price Index inflation indicator is at its highest level in years.

“The minutes added that ‘a few’ members believe raising rates at ‘an upcoming meeting’ would allow the Fed greater flexibility to respond to higher-than-expected economic growth ahead.

“The FOMC [Federal Reserve Open Market Committee] meets again in March. Market expectations currently are low for a rate hike at that meeting — about a 1 in 5 chance — even though the Fed in December indicated that three moves could be on the way this year.”

Up to this point, financial gurus had been predicting the likelihood of a March Fed interest rate hike at about 18 percent. Thursday morning, that number has inched up just a bit to 22 percent.

Markets Wednesday as well as this morning seem confused and are in a holding pattern in most sectors, save for the oil patch. Oil languished Wednesday on fears of a huge oversupply. But Thursday morning oil capacity figures showed a substantial drawdown of reserves giving crude oil and crude oil stocks a healthy boost.

But despite this, at least some traders are still nervous about that potential interest rate hike, CNBC noted in an additional article:

“‘This potential action could admittedly precipitate aggressive selling among concerned market participants, yet share prices would likely recover quickly in the absence of any promises made by the Fed to pare its balance sheet in the short term,’ said Jeremy Klein, chief market strategist at FBN Securities, in a note.”

Some reasons for Klein’s concern:

“In economic news, weekly mortgage applications fell 2 percent for the week ending Feb. 17 amid lackluster refinancing. Existing home sales rose 3.3 percent in January.”

From what we are able to ascertain, there is no justification for a March interest rate hike, given the persistent and historically low rate of labor participation, a situation that has persisted since the outbreak of the Great Recession. This means that the unemployment rates the Fed is using—numbers that exclude this huge class of now uncounted unemployed workers—are phony.

Further, while expanding anemically, the U.S. economy remains on the edge of life support, meaning that it really needs the kind of stimulus Donald Trump has been preaching to kick it into higher gear and slightly above the inflation rate the Fed has said it actually wants.

The Fed, it appears, fears being caught behind the inflationary curve. But is a little extra goosing of the economy so scary that the Fed will be frightened into raising interest rates so fast that they’ll nip that much-needed recovery in the bud? Could be.

At this point, the better course would be to stay loose a bit longer. We actually believe the Fed should keep hiking interest rates back to normalcy, but not so quickly it kills a golden goose that has not yet hatched.

On the other hand, to be perfectly blunt, it could be that Janet Yellen and a few other Fed members might simply be pissed off by Donald Trump’s pointed barbs and may be plotting a bit of good old Washington, D.C.-style payback by killing the ongoing Trump Rally and the president’s forward-looking plans by plunging this anemic recovery back into recessionary territory. Guess we’ll just have to wait and see.

In other news, the retail sector was shaken and stirred by the quickly introduced and then quickly withdrawn offer by Kraft Heinz to buy out UK- and Holland-based food and personal care giant Unilever for $143 billion. Unilever shut that one down in no uncertain terms.

CNBC again:

“The deal would have brought together Kraft Heinz brands such as Oscar Mayer, Jell-O and Velveeta and Unilever’s Hellman’s, Lipton and Knorr. The combined company would have rivaled Nestle as the world’s biggest packaged food maker by sales.”

Both stocks spiked on the initial news. But then Unilever quickly tanked as word of its abrupt refusal to talk hit the wires, causing Kraft Heinz—currently owned by Warren Buffett and a Brazil-based retail conglomerate—to pull the offer, leaving the company with PR egg on its face.

You’ll note that we’ve referred to three straight instances of crisply reported financial news from CNBC, which remains a great go-to source for financial updates.

The problem with CNBC’s online site, however, is that you have to slog through at least 10 links each day on the site’s homepage loaded with fake news lambasting transgressions President Trump hasn’t even committed, likely a result of being controlled by the far-left NBC network, which in turn is heavily influenced by the entirely fake news travesty also known as MSNBC. It’s small wonder that CNBC is losing its financial news dominance to Fox Business these days.

Since all “news” today has morphed into the Entertainment category, it’s hard to take anything but provable facts seriously any more when it appears on TV or online. Take the current drumbeat of reports on virtually all news sources that Donald Trump is getting historically awful approval ratings when compared to most other recent first term presidents, with numbers wallowing in the mid- to low-40 percent region.

In fact, “The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 51% of Likely U.S. Voters approve of President Trump’s job performance. Forty-nine percent (49%) disapprove. (Feb 20).”

The Wall Street Journal (behind a pay wall) echoes the lower numbers from most other polls, agreeing with the phony consensus by citing the Real Clear Politics aggregate of polls on Presidential approval.

But here’s the deal: While the Real Clear Politics averages last November were predicting a Hillary Clinton electoral landslide, Rasmussen was at least in the game and closer to the truth, giving Trump at least a possibility for a win. So why in the Sam Hill should we believe the Real Clear Politics averages on Presidential approval now?

We’ll stick with Rasmussen, which at least retains some polling integrity. We’ll consign the “Presidential approval” numbers from the Real Clear Politics averages to our growing fake news dustbin. It’s getting harder each day to believe anything the press puts out unless you fact check them by finding at least two or three more sources that have facts and figures to support what’s out there. More importantly, those fact checks need to come from historically unimpeachable sources. And those are getting really hard to find these days.

All the nonsense makes it harder and harder to invest, since you’re rarely able to tell whether all the anti-Trump blather is wholly true, partially true, or simply a non-stop pack of lies like the President says today’s MSM-reported “news” really is. It’s one hell of a world we live in, and a hell of a context in which to make investment decisions.

Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17