Yikes: The Fed HIKES Again [FOMC Statement]

here we go and it is 4.75 we got the 25

BP right along expectations not a

surprise at all shouldn't see much

movement off that now we got to get the

summary of economic projections that's

the next big deal summary of economic

projections the statement is out uh

implementation's out okay uh 75 BP

tighter conditions of credit for

households and businesses and expect

them to weigh on economic activity

hiring and inflation that's actually a

big deal uh that they're they're

referencing tighter economic conditions

that amplifies the federal reserve's

hikes right I'm trying to get the

summary of economic projections but that

has not been posted yet so let's just go

ahead and go through their press release

alone here uh they say the U.S economic

system remains on resilient ground we've

got uh forecast here we go median

forecast 5.1 they're keeping it stable

at 5.1 on the SCP they didn't go up and

they didn't they didn't go down I

actually think that's bullish they're

keeping the same pace for reducing

treasuries holding on mortgage-backed

Securities so no change there that's

interesting 5.1 I really want to see

that Dot Plot waiting for it to post on

the website here this is all coming

through the wire right now in terms of

these uh these updates that we're

getting so waiting for oh there we go

projections are out and the projections

in my opinion are the most important and

then we'll go through the policy

implementation statement as well so uh

here the summary of economic projections

wow I'm surprised look at that folks

they kept the projection the same they

actually think they're gonna there's

their higher for longer oh okay that's

the hire for longer going up to 4.3

instead of four one okay oh look at that

they actually moved this slightly closer

to recession in 2023 usually they do not

go under uh 0.5 that's interesting then

they they're actually keeping us out of

a recession at 24 4 and 25 unemployment

rate 4 6 pce inflation and you can see

the previous estimates here they did

reduce GDP both for 23 and 24 were

reduced so lower GDP and 23 by a tenth

of a percent lower GDP and 24 by uh four

tenths of a percent that's 400 basis

points unemployment rate they are

refusing to Signal any kind of

increasing pain in the unemployment rate

uh Stocks by the way seem to be liking

this this is uh this is kind of what we

wanted this was my best case scenario

was 25 and dovishness uh now I thought

this might be a little bit more dovish

right here but that 5-1 on the median is

a little higher than I thought look at

this folks they're keeping inflation

expectations for pce stable

slightly higher for 2023 stable into

next year core slightly higher but

mostly stable here no Paul volcker no

runaway inflation what were the rain

changes that we got for GDP uh oh oh

look at that central tendency right here

somebody's actually knocking the door of

recession look at that range right there

change in Real GDP 0 to 0.8 that's a

little bit of a red flag that's a

recessionary red flag right here look at

that range there's your recession there

it is uh but uh we also had that range

projected last time as well so one of

them is actually getting us a little bit

closer to out of recession whereas

previously they also thought we might

see that recession the range is sort of

the low versus the high right uh the the

median is is a type of average right

it's supposed to represent the middle

let's look at the Dot Plot what do we

got for the Dot Plot wow they're

actually a whole lot higher than I

thought they're all consistent here for

2023 Q4 pretty much all staying above

that five percent line now I want to

compare that to what we had in the last

Dot Plot so let's go to the last plot

which was right here and let's go here

Kevin's estimates were wrong uh so I'm

gonna erase these so that looks pretty

similar uh you've got I mean you had two

dots below for 2023 all of them above

with two dots as high as about

5.675 going over here yeah you've you've

really just Consolidated around that

five one level so they're sending a

signal here that we still have uh one or

two hikes left in us so this is really

telling us that we're gonna get our

March 25 We're not gonna go down we're

not gonna pause yet we have to deal with

what's remaining to be elevated

inflation uh I would say this is this is

uh no signal of stress in banking really

we are probably setting up for a May 25

as well this will take us to uh five

percent right on the lower bound and a

five on the lower bound is probably in

line with that tendency of uh 4.1

percent so the federal funds rate being

at 4 or 5.1 rather it sits right there

in the middle of one more hike in May

and then done that's about where we sit

so one more Before Dawn I think it's too

soon to call for a pause I expect Jerome

will tell us he's being data dependent

uh that's not going to be much of a

surprise at all uh looking at uh yep the

dots moved up a little bit the FED let

me see really quick what we what else we

have here what are the suits saying like

most economists the FED does think that

banking turmoil will affect the economic

Outlook recent developments are likely

to result in tighter credit conditions

for households yep we expected that you

got Tesla popping off a little bit right

now uh jumping up about one percent

looks like most stocks are trying to

pump a little bit let's fix this here

actually let me try this I have a new

button here let me see if I break

something by doing this

oh that looks good look at that so we

could keep that up while talking uh

although I should move whatever okay

anyway so it's a little more adjustments

to do but anyway I'm playing with this

new board sorry about that you you'll

get to experience it a whole lot more if

you want if you join the courses linked

down below you get all those private

live streams all right fed remains

highly attentive to inflation risk using

interest rate tools to deal with

inflation using balance sheet to address

Financial stability issues that's

exactly what I thought they would say

that look we're gonna keep going 25 BP

because we got to deal with inflation

but guess what we got a whole tool belt

baby oh you got some inflation we got

some pepper spray for you oh balance

sheet problems we got some handcuffs for

you we got a whole tool belt you want to

keep trying us I think that's what we're

gonna get from j-pal here initial take

on this per Wall Street seems to be

slightly dovish

uh does look like uh risk assets are

moving up a little bit usually what

happens by the way and I just want you

to prepare for this usually what happens

is we get a w okay so often that and not

in this case because so far we're going

up but often we actually uh go down a

little bit I mean maybe I guess we still

have 23 minutes but oftentimes we go

down going into the the press conference

as soon as the Press event begins right

here stocks hit a little Peak then as

he's talking they tend to go down and

then and this is an average over the

last seven instances what the stock

market the S P 500 has done and then

towards the end of the day they end up

back up so this is usually the kind of

volatility pattern that you get per the

average of the last seven meetings from

the FED but anyway what do they say here

inflation remains elevated modest growth

they did take us a little bit closer to

recession recent developments are likely

to result

in tighter conditions for households and

businesses and way on economic activity

hiring and inflation hey well this is

kind of what they want a little bit of a

Slowdown in hiring because of the

uncertainties

the yield curve has deepened uh markets

definitely see this as dovish the

committee seeks to achieve maximum

employment and inflation at a rate of

two percent over long term and support

of these goals the committee has decided

to raise the target range for the FED

funds rate to

4.375 to 5 the committee will closely

monitor incoming information and assess

implications for monetary policy the

committee anticipates that some

additional policy firming may be

appropriate in order to attain a stance

of monetary policy that is sufficiently

restrictive enough to return to two

percent over time yeah well if you refer

back to the 80s over time was 20 years

in determining the extent of future uh

increases increases in the Target rate

the committee will take into account the

cumulative tightening the lags of which

we've already seen future increases is

very interesting because so far they're

really only pricing for another 25 BP so

uh we'll see what happens there in

addition the committee will continue

reducing its Holdings of Treasury so no

change over here and second page

uh nothing really it looks like this was

unanimous voting for monetary policy

actions were all everyone and the

committee's assessment will take into

account a wide range of information

including readings on labor market

inflation pressures blah blah blah blah

okay fantastic so we got the 25 that we

were expecting markets taking this as

dovish though usually right into the

press or we have you know a little bit

of a Slowdown so that's not uncommon

stock market seems to do that in a row

uh 89 out of 100 economists were looking

for 25 so this is really no surprise a

pause would have sent the wrong signal I

think overall this SCP is not as dovish

as the best case scenario but it's

decently dovish I was looking for a

little bit of a drop on that uh that fed

funds rate projection so unfortunately

does look like they're hitting us with

probably another one to two raid hikes

uh if you look at their statement and

you hear them say uh increases and

implies lies two more and if you look at

these projections here it implies one

more so one one to two more 25 bpers uh

they are acknowledging the tighter

Financial conditions which that's what's

leading to that softening in Real GDP

and uh the central tendency for real GDP

uh fed's message is clear here this is

uh these are now the Wall Street suits

so let's say what they have to say here

Wall Street suits the fed's work isn't

done however the median projection as to

where rates will be year end does show

that officials are paying attention to

stability concerns yes in the fact that

they haven't lowered it or it's optimism

on inflation either way dovish overall

here bond yield steepening looking for a

little bit here the language on ongoing

increases implies some ongoing uh

tightening yep no kidding fed will

continue and we read through that

already Okay so this gives you an update

on what we got in terms of the 25 BP my

take takeaways from this

all is normal okay big bottom line

takeaways before the FED presser big

bottom line takeaways for the average

American the average investor whomever

okay big bottom line takeaways here what

do we got we got number one no Paul

volcker there's no Paul volcker so if

you're still sitting around really

thinking the stock market's gonna

plummet on a pivot you haven't listened

to my explanation on a pivot we've

explained that many times before I

really don't want to go through it again

uh basically there's a pivot and then

there's the FED U-turn generally we want

to invest where the FED U-turn is and

u-turns usually coincide with not only a

big mix in policy but also uh bailouts

which we've started seeing some of those

bailouts so are we getting closer to a

U-turn I don't know but we haven't seen

any kind of fed pivot yet uh and

honestly I hate saying the phrase but

remember folks this pivot will occur

when inflation ends the market is

worried about inflation not going away

well as soon as the FED u-turns and

changes directions it it means they have

accomplished killing inflation to their

satisfaction the FED is their problem in

the cycle in 2000 2007-2018 the FED

wasn't the problem it was Tech it was

real estate and it was a lack of

inflation those were the market problems

before now the fed's actually having to

respond to too high inflation so the

fed's creating its own problem when the

FED stops fighting its own problem

that's a great signal that means they've

accomplished their goals at least to

some extent so anyway I'm pretty happy

about that overall I think this is uh

this is uh kind of a long expectations

you know we're not going to get a super

Dove here we still got work to do I was

hoping it to be a little bit more dovish

but it's dovish enough I think to uh to

be satisfying to markets it should give

you confidence that we're not looking at

Paul volcker so that's number one number

one no Paul volcker number two closer to

potentially that that accomplishing the

mission right uh number three we did get

the Federal Reserve acknowledging that

yes there are going to be issues because

of the banking crisis those issues

because of the banking crisis are

specifically going to relate to tighter

credit conditions we've been covering

those regularly those are likely to

lower earnings per share for companies

in the future specifically in my opinion

spy companies S P 500 companies your

Consumer Staples your your Industrials

wouldn't surprise me so uh Jerome Powell

speaks obviously soon but uh for me

average person here no Paul volcker is

bullish uh overall relatively dovish

statement yes still potentially looking

at one to two hikes uh and uh we'll see

what Jay Powell has to say now keep in

mind how the market moves going into

j-pow talking I'm gonna make this very

very clear out of the last seven times

that we've had these meetings the

average the way that the market has

moved is initially up then you get a

Down

and then you get an up again right when

Jerome Powell speaks then you get a down

during a speech and you end the day up

that's usually how the pattern goes that

doesn't mean this time can't be

different but that's typically what you

see so I think this is fantastic now I

know that some people say oh rate hikes

are not bullish I I mean I don't I the

fact that some people were actually

thinking there would be a pause here

blows my mind that would be more

concerning that would be concerning that

something serious is actually wrong rate

hikes at 25 are in my opinion very

bullish because they mean nothing broke

to an extreme level and we're not

visiting Paul volcker if we were getting

raid hikes to the tune of one to two

percent 75 BPS maybe over and over again

or 100 BPS that would be bearish a pause

in this case that would have been

bearish I mean like I don't know how you

could say that a 25 BP is not a fun is

not a fantastic uh result so far again

Jay Powell will be talking soon uh but

this gives us a little bit of a heads up

here in terms of uh a summary of so far

what the statements show again trending

a little bit closer to uh to recession

but uh the FED refusing to really at

least in aggregate believe uh that we

are knocking on the door of recession

remember those estimates are an

aggregate estimate of everyone it's not

like they collude on those although they

might anyway uh and uh the other thing

to remember is today's coupon expiration

day so get the best price ever link down

below prices go up over time and you get

a price match guarantee uh in the event

they were lower for some reason in the

future