Friday Chart Book

March 22, 2024

You have to love the Fed. Whatever you think about Wednesday’s presser, you should consider not only what was said but also what was implied.

Two different views were basically presented, one by the joint committee itself through the statement and the other by Jay himself during the press conference.

Overall, the statement and updated SEPs read neutral, with elements of both hawkish and dovish leanings.

"The economic outlook is uncertain, and we remain highly attentive to inflation risks. We are prepared to maintain the current target range for longer if appropriate. We know that reducing policy restraint too soon or too much could result in a reversal in the progress we've seen in inflation and require tighter policy to get inflation back to 2%."

Powell’s press conference, however, was firmly struck on the dovish side. I can’t remember the last time such a divergence was at play. It begs the natural question as to why he has chosen such a path.

On the surface, the overall statement concluded that the Fed doesn’t yet have the confidence that inflation is heading back to 2%. Jay described recent inflation as “bumpy” but is remarkably relaxed about it given the view that it might be once again a seasonal affair, which is possible but not certain.

The market is pricing the likely first cut as June and is holding onto the idea that the Fed will cut by 75 bps this year. But unless the data rolls over and gives the Fed the confidence to go, rates are not going to move. Jay said the Fed certainly wanted to avoid the circumstances where it cut rates and then discovered it needed to raise them again. The irony of this wish is that it is self-fulfilling.

But here is the trick and my assessment back in December that the Fed had already eased by announcing their “pivot”. How can you not grasp that the market will front-run your intentions and dovishness and, therefore, create the very easing of financial conditions that will ultimately creat the environment you want to avoid? This is amateur hour. Game theory in its simplest form. This guy never played poker. If he did, he’d lose every time.

I will opine more on this. I think it is one of the most important pivotal market moments in a while.

In short, they are prioritising growth over inflation, while the latter is their mandate. Implicitly, they are telling us and acting as if their new inflation target has a 3-handle, not a 2. This eats into your credibility over time with potentially meaningful market consequences down the line.

Source: Dall-E

For now, let’s focus on what’s in front of us. So, let’s review the full book of 254 charts. We cover the whole asset spectrum from equities, bonds, commodities, FX and Crypto to give you the most extensive view.

You can now also use my models in TradingView scripts, which I made available for subscribers to use on their charts for a fee. If you are interested, ping me an email with your TV username.

I am close to reaching capacity in terms of the number of users granted access. After that, I want to limit the use, with only paying subscribers having the option to subscribe.

By now, most of you will be very familiar with the models and their signals. If not, please study the guide I have published. I have now also recorded a brief video tutorial, which you will find further below.

Let’s go!