What Jay Could Have Said..

A transparent no bullshit Fed Chair would have said:

This is a tough job, but ending the free money game that Ben started in 2011 was a good place to start.  This is a huge change to the economic equation. Increasing rates to 4% from zero means that zombie companies will be trashed four times faster. That is a good thing. While we know labor is over half of the inflation picture, this is really part of a structural picture that has been brewing for over 40 years, ever since the supply side experiment and is not something that interest rates should be used against.

So this is an opportunity for the economy to work as intended and allow traditional supply / demand forces to work as we let current interest rates prevail.

But the reality is, the FED cannot call it straight.

They seem to have to overkill or underkill. And that is where we are. The chart I watch to see if the FED is pushing against a string the 2 YR vs 3 Mon rates, dropped further after Powell’s news conference. To me that means the FED has done enough and market rates have topped. Plus the dollar declined more.

What we all will have to contend with now is whether the FED can produce a recession. I will be using yesterday’s closes as starting points in order to evaluate which sectors are going to outperform going forward.

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