Opinions expressed herein are those of Brett Ewing and S. Lance Mitchell and do not represent those of Centaurus Financial, Inc.
After Fooling Everyone with FED Minute Speak, the Real Numbers Tell a Different Story
- After banging the rate hike drums at the last FED meeting, Yellen & her presidents successfully pulled forward market expectations for a raise in the FED Funds Rate
- We released a note shortly thereafter affirming our view in the face of the hawkish minutes that there would be no hike—not in June, not even in July
- The extremely weak jobs numbers & ISM Services numbers only strengthened our resolve in this view
- While there is a risk of an overreaction to single reports and weakness being one offs it also gives the FED presidents a reason to take a wait & see approach
- The proof of the wait & see approach should find its way into new FED speak in the coming months
- In our view the FED has finally learned what it means to be data dependent & with the data this weak, one would have to be properly senile to believe you need to raise rates in the face of it
- We believe the FED learned their lesson the hard way after the December hike that produced one of the worst 2 month sell offs in history when market participants felt the FED had let them down
- It is our view that market participants have once again realized the FED is on their side and another Central Bank related put is being placed on risk assets again because the FED is proving they will not just put their head down & continue to raise rates no matter what
- Unfortunately the only solution we see is for the FED to knowingly and dutifully get behind inflation
- This of course leads to risk assets continually being bid up, not necessarily because of a great environment but because of a new inflationary spiral we could be headed into & the persistence of lower rates forcing pension funds & insurance companies to put more assets behind yield plays to produce the benefits they have promised
- For this reason we believe the weak dollar trade is still in play with an emphasis on Emerging Markets, Industrial, & Cyclical plays as we have highlighted in earlier notes
Securities and advisory services offered through Centaurus Financial, Inc., member FINRA and SIPC, a registered investment advisor. Centaurus Financial, Inc. and First Franklin Financial Services are not affiliated companies. This presentation is for educational purposes only and is not intended for investment advice or a solicitation of services.