More Fed Speak!
I am writing this edition of The Weekly Update on Wednesday, August 23, 2023, just a few days before Fed Chairman Jerome Powell has his press conference on Friday, August 25, 2023.
It seems pretty easy to guess what he will say, but perhaps more important is what he doesn’t say.
It is highly likely he won’t reference this headline quote from Federal Reserve Governor Harker.
Philadelphia Fed President Patrick Harker suggest interest rate hikes are at an end.
Harker was referencing this Fed data when making his comment. As you observe in the chart below, notice Money Supply (M2) leads the household inflation index (CPI).
Not only is CPI now down from over 8% at the peak to 3%, but on its way to 2% (the Fed publicly stated target inflation rate), or below.
Per this second chart from the Bureau of Labor Statistics (BLS), the CPI excluding housing, is already at 2%.
As you know from reading these updates, I have called the Fed out for wanting to increase interest rates as inflation post-Covid was far from “transitory” as Powell named it.
No, in fact, inflation was here to stay, as I wrote for years! Now inflation is at the Fed’s 2% target and yet Powell will likely still talk tough on the potential for higher interest rates ahead!
The Fed is now wrong again! Soon, very soon, the Fed will once again realize they got it wrong and will go into full-blown “fix it” mode.
What the press is about to sell you next is the “deflation” monster.
As investors, what we need to focus on is the profits of Corporate America. I am happy to report they are at the highest levels in the history of earth!
Please don’t let the headlines shock or worry you out of your ownership in Corporate America. Summer, especially August, is messy. The big money desks, think trillions under management, are at the beach and the “B” team is at the wheel.
We intend to continue using any downside volatility to add to enter our well thought out lower risk, lower volatility, yet high performance investment positions.
I’m interested in your thoughts, comments, and observations. Feel welcome to call, email, or stop by the office and say Hi.
James O. Lunney, CFP®
CERTIFIED FINANCIAL PLANNER™ Professional
Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.