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US markets confused by Powell comments, rally hard, then pull back

Written By | Jul 10, 2019
US markets, Powell

Cartoon by Branco. Reproduced with permission and by arrangement with LegalInsurrection. (See link below this article)*

WASHINGTON.  In comments to Congress during his semi-annual appearance on Capitol Hill, Federal Reserve Chairman Jerome Powell seemed to encourage speculation that the Fed would cut interest rates. Soon. Yet, his remarks still came out cloaked in Greenspanian Washingtonspeak. He danced before this burning question without addressing it head-on. As a result, US markets seemed confused by those Powell comments, at least thus far.

We watched stocks rally hard at the opening bell. But an hour or two later, a few uninvited bears invaded the party. They promptly cut the rally in half as we approach the noon hour Wednesday. Prior to the invasion of the Party Poopers, the broad-based S&P 500 average broke the 3,000 point barrier for the first time ever, based on the day’s earlier interest rate rally.

Powell comments confuse US markets

Of course, Powell actually promised nothing. But he indicated that economic factors remained sufficiently iffy to justify some kind of market pleasing move. And we all know what that likely move might be, observes CNBC.

“Business investments across the U.S. have slowed recently as uncertainties over the economic outlook linger, Federal Reserve Chair Jerome Powell said Wednesday in prepared testimony to the House Financial Services Committee.

“‘Inflation has been running below the Federal Open Market Committee’s (FOMC) symmetric 2 percent objective, and crosscurrents, such as trade tensions and concerns about global growth, have been weighing on economic activity and the outlook,’ Powell said in his [Congressional] testimony, reiterating the central bank will ‘act as appropriate’ to sustain the current economic expansion.”

Mr. Market, of course, interpreted “act as appropriate” as Powell’s moral equivalent of “rate cut.” Moving right along.

“The Fed chief also noted that business investment has slowed down ‘notably,’ adding the outlook has not improved in recent weeks….”

“Notably” seems to be another synonym for “rate cut.” Or at least Mr. Market persists in thinking so.

The Fed Chair continues to opine. And confuse.

“Powell’s prepared testimony appeared to confirm the market’s rate-cut expectations. Stock futures turned positive after the remarks were released. The Dow Jones Industrial Average was headed for a gain of more than 100 points at the open.

“‘There is a risk that weak inflation will be even more persistent than we currently anticipate,’ Powell added, further bolstering the case for a rate cut.”

Yet despite today’s apparent move toward optimism – meaning “risk-on” again for stocks – investors seem to lack the animal spirits necessary to keep the current wobbly summer rally on track.

Do-nothing “Impeach Trump” House Democrats have done zero for their constituents in 2019

In many respects, Congress has stood in the way of the Trump economic program since the Democrats took back the House of Representatives in January. Spending roughly 150 percent of their time trying, in fits and starts, to mount an impeachment drive for the President, they’ve purposely neglected economic matters. (Except for give-away programs that won’t pass the Republican-led Senate.)

And, of course, House and Senate Democrats have stymied the Trump administration’s multi-faceted attempts to halt the World War Z-style hordes of illegal aliens that continue to invade this country, generally via Mexico.

After all, why stop importing waves of the only population guaranteed to support the Democrats’ drive to impose One-Party rule on all Americans? It’s something they can’t do with the existing crop of genuine American voters – both native born and naturalized (legally) – who strongly oppose them on this.

When at least half of Congress hates their constituents, we’re in trouble. And so is Mr. Market.

Between a hatred for President Trump and an equal hatred for their stupid, “deplorable” constituents, today’s Democrats, like their Socialist counterparts in Europe, seem to treasure the endless waves of illegal aliens flooding their country, sometimes for “asylum,” that’s true; but more often for the “free stuff” they know they’ll get, courtesy of the American taxpayers that the Dems continue to stiff in their drive to get more voters that will always vote the right way.

By pursuing their anti-Trump and anti-American citizen crusade, the Democrats are also doing something far more sinister. They’re encouraging the obvious enemies of the US – China, Russia and the nutcase mullahs running Iran – to play stall-ball with agreements, compromises, treaties, and anything else that might lift all economic boats and make Trump look good in the process.

In so doing, they’re also deliberately undercutting the authority of an American president. That’s an incredibly dangerous thing to do in our incredibly dangerous world. It’s effectively mass sedition waged by the Democrats against their own constituents. They’re doing it to permanently gain total power over the US. They want to replicate exactly what they did two decades ago in their secret, once-Republican California Test Lab.

Political uncertainty generally leads to economic uncertainty

It’s precisely this that keeps markets uncertain and holds businesses back from R&D and making new commitments to growth. And the businesses themselves often don’t help the cause with their increasingly sordid virtue-signaling stunts, like the recent Nike-Kaepernick Caper. What sorry, sordid crap this is.

Worse, all the left-wing pressure on American corporations to flaunt their all-new “wokeness” is already hurting corporate sales figures. That’s something Nike will experience soon now that everyone knows who’s really running that company.

Between the Fed’s over-eager raising of interest rates last year, the asinine antics of a completely dysfunctional Congress, the Democrat-encouraged and Soros-funded attacks on ordinary Americans by legions of cowardly, Stalinist Antifa thugs, and the wildly illegal, leftist-judge-enabled illegal alien hordes, it’s remarkable that this country remains as well-off as it currently appears to be.

Rally today? But what happens tomorrow, given current political winds?

But investors are seeing the slippage in momentum as the Marxist rot continues to spread in the system. Stocks are rallying again, yes. But the whole market looks toppy. Which means that we’re sure to have some considerable carnage in stocks some time between now and October.

We remain fairly fully invested ourselves. No point in missing the current fun. But rest assured, we’re ready to pull out en masse if the Democrats here and our enemies abroad manage to cause an entirely unnecessary recession to happen. It’s all battlefield prep. The goal: To cause a recession beginning in or around 2020. Just in time to torpedo President Trump’s re-election chances.

Stay tuned, kids. Mr. Market remains badly infected by political and headline manipulation. And the worst may be yet to come.

— Headline image: Cartoon by Branco. Reproduced with permission and by arrangement with Legal Insurrection


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