I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. My ninety-ninth YouTube video “50 basis points because the Fed is scared not to” went up today.
Tomorrow, January 10, before the market open, the Bureau of Labor Statistics will announce the Consumer Price Index inflation for January. Right now economists surveyed by Bloomberg are expecting an annualized increase of 7.2% in inflation. That would be a significant increase from the 7% CPI inflation rate in December and the highest inflation reading since 1982.
America’s gross national debt topped $30 trillion for the first time last week. In January 2020, before the pandemic, the Congressional Budget Office projected that the gross national debt would reach $30 trillion by around the end of 2025. The question to me isn’t “Does this matter?” But “In what way does this matter?”
Today, January 26, in its post Open Market Committee press release the Federal Reserve said it would “soon” be appropriate to raise interest rates, as inflation runs above policymakers’ preferred target and the job market strengthens. The Fed left interest rates unchanged with the benchmark at 0% to 0.25%. The Fed also left its schedule in place to end its bond buying program in March. And promised to shrink its balance sheet holdings (most probably by not replacing bonds in its portfolio when they mature) “in a predictable manner.”
According to stock market history, stock investors should be “happy” that the Federal Reserve is about to start raising interest rates. Stocks have risen at an average annualized rate of 9% during the 12 Federal Reserve interest rate increase cycles since the 1950s and delivered positive returns in 11 of those instances, Keith Lerner, Truist’s co-chief investment officer told Bloomberg. There’s one exception. The 1972-1974 period, which coincided with the 1973-1975 recession. Which may, unfortunately, be more applicable to the current period than all those other historical examples.
When the Federal Reserve talks everybody listens. Although it’s extremely unlikely that the Fed will say anything of market-moving import after the Wednesday, January 26, meeting of its Open Market Committee. And it’s even less likely that the Fed will do anything. For any action and any meaningful commentary investor and traders will have to wait for the Fed’s March 16 meeting.
The yield on the 10-year Treasury popped to 1.87%, a jump to 9 basis points on the day (and now 47 basis points in a month. It takes 100 basis points to make one percentage point.) Speculation is running rampant, and the herd is running with it, that the Federal Reserve will raise interest rates by more than 25 basis points at its March 16 meeting. Can you say “50 basis point rate increase”?
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. My eighty-seventh YouTube video “3 Sectors to Avoid After the Fed Tightens” went up today.
The big news out of Federal Reserve Chair Jerome Powell’s told Congress appearance before the Senate today (President Joe Biden has nominated him for another term as head of the Fed) was that if inflation doesn’t come down, the Fed would more aggressively raise interest rates.“If we see inflation persisting at high levels, longer than expected, if we have to raise interest rates more over time, then we will,” Powell said in a Senate Banking Committee hearing. Yep, the Fed will fight inflation. “Dog bites man.” Film at 11.
Non-farm payrolls grew by 199,000 in December (and a revised 249,000 in November) the Bureau of Labor Statistics announced this morning. Economists surveyed by Bloomberg had expected the U.S. economy to add 450,000 jobs in the month. The official unemployment rate fell to 3.9% from 4.2% in November and an expected 4.1%.
Today, the Federal Reserve released its minutes from its December 15 meeting of its interest-rate setting body the Federal Open Market Committee. Investors and traders didn’t like what they thought they heard–a growing consensus on a first interest rate increase at the March meeting.
