Is Powell done hiking? The Market thinks so

Welcome to the Macro Report - I'm your host J-Fielder. Let's get started

What is the Market Facing?

Headwinds

Debt Ceiling Uncertainty
Banking Crisis Uncertainty
Geopolitical Uncertainty
Elevated Bond Volatility

Tailwinds

Better than Feared Earnings
Lower Yields, Lower Dollar, Lower Oil
Global Liquidity
Lower Trending Inflation

The May 3rd Fed Meeting

Is Powell Done Hiking?Powell's language was neutral, using words like "data dependent," while the FOMC statement turned dovish by removing the following statement. "The Committee anticipates that some additional policy firming may be appropriate." I believe they are signaling the end of the hiking cycle. My conclusion is that the Fed is in the process of communicating a PAUSE

And now the Market is Betting the Fed will start cutting in September.

The Bear's believe in "more to come" while the Bulls believe it's over!

Where is the S&P 500 Headed?

The Fastest Horse In the Race

Risk On Charts

10y Bond Yields (The Cost of Capital) - Yields are still pointing lower, with clear resistance at 3.65%.

The Dollar (The Cost of Trade) - Maybe bottoming in the short-term, but the moving averages tell me momentum is dragging DXY lower! Below 101 is another Risk on variable!

Crude Oil (The Cost of Energy) - Very simple, as long as oil trends lower, inflation expectations will fall, which is very disinflationary and bullish for Risk assets

Global M2 (Money Supply) - China's Credit Cycle seems to be pouring into U.S. Equity markets. As they grow, so does the rest of the world! China is the largest consumer of Semiconductor CHIPS!

Risk Off Charts

ISM (The Business Cycle) - When the business cycle bottoms, the bull market will re-accelerate. So far, we are just not there, and it could fall further.

Core Services (Core CPI) - Unfortunately, Core services remain sticky, and we don't know how long this will stay. But Shelter is falling, so I think Core will get below Fed Funds by the end of summer.

Economic Activity

In general, the economy is cooling along with inflation. As long as growth doesn't collapse, I'm convinced the lows are in for stocks and crypto, so we grind higher or move sideways.

Inflation

Headline CPI is now below Fed Funds (upper limit). Once Core gets below Fed Funds, the Market should catch a huge BID.

We see Disinflation in one of the largest goods items for consumers. Progress on inflation.

The Stagflationists are flagging supply-side inflation data, and I think it's something to look out for, but...

The YoY trend points lower... No Stagflation

Business Activity

3/4 Leading Economic Indicators are expanding. Manufacturing is still struggling while Services lead the recovery. Although the U.S. is still in decline, Global PMIs are starting to recover.

Employment

Job Openings are falling while more people come into the labor force and fewer people are unemployed. The Jobs market is being filled with workers, which is progress in reducing wage inflation. Stronger Employment = More Productivity which leads to lower inflation!

Closing Thoughts

So far, the economy is stronger than we thought, while Headline inflation abates further. Inflation is a little stickier in services, but the Market seems more concerned with the Fed Stoping their hiking cycle. Simply because it knows inflation will fall because the Banking Crisis and tightening credit standards are deflationary;that's an ironic positive. At the same time, the rumor on the street is that the U.S. Treasury is discussing "deposit guarantees" to ease systematic bank runs. That's a positive. I hope this informs your trading and investing decisions! - Jeremy FielderUpgrade your subscription to read a deeper analysis of my convictions + Where and Why I'm so bullish over the next 18 months and an actionable Trade idea 🔥👇🏽👇🏽👇🏽

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