As I type this the S&P 500™ made its mark for hitting the highest level it’s ever been in the history of mankind. And it may not be the last.
For those that may be confused because they’ve seen reports of it already doing it. That was in regards to its closing level. This is the highest price ever bought or sold – ever. Repeat: Ever!
So now I can hear you saying, “So what’s so ironic about that? Isn’t that a good thing?”
Well it is, unless you’re Jerome Powell along with his cohorts comprising the Federal Reserve’s FOMC Board of Governors. For they have a conclave scheduled for this Tues. – Wed. to evaluate, then set monetary policy.
Remember what they did last meeting? Hint: rhymes with pause and halt in regards to rate hikes and balance sheet run off.
“Why is that important, can’t they just change their minds and restart or guide differently?” you ask. Here’s another hint: not without unleashing monetary chaos, emphasis on: chaos.
The Fed did such an about face at the last meeting just one month ago that they absolutely destroyed any remaining credibility they had for their reading of the economy, what their policies have in relation to it, and what the capital markets have become since their interventionism nearly a decade ago. Need I remind you of the term “autopilot?”
It was not until December’s sudden need for the Treasury Secretary to interrupt his vacation and make a public announcement that he had called the largest U.S. banks and verified to his approval that they were “adequately funded.” Since then Mr. Powell and anyone else at the Fed that could get to a keyboard, camera or microphone has been making the argument for why everything they thought was wrong and now needed to halt, pause and maybe even reverse course. i.e., reconstitute some QE type initiative.
Since then we have gone from, “The depth of despair in December.” To now, “Everything is so freakin’ awesome its coming up roses for May!”
Regardless of how you think the government numbers are calculated (they’re government numbers, need I say more?) you have:
- GDP printing over 3% = Awesome!
- Unemployment at record lows = Freakin’ Awesome!
- Retail spending printing blow out numbers = I can’t control my feet Awesome!
- And with that the Fed can’t move, as well as said (or signaled however you want to state it, but they’re basically the same thing) it won’t till after 2020. I mean: Awwwwwe-Sssssome!
Repeat: after 2020. Awesome! – Awesome!! – Awesome!!! Awesomeness so plentiful they can’t control their Buy and Hold sentiments for awesome!
The Fed, as I’ve said ad nauseam, has painted itself into a corner and the bucket they used to do the painting is itself, empty. Meaning – they are damned if they do, damned if they don’t and can’t paint over their mistakes as they try and flee said corner, and will be blamed (and damned) for the results either way. Period, full stop.
Again, to reiterate: the exact conditions that should enable, as well as encourage the Fed to normalize – are the exact set of circumstances that won’t allow them. For if they do?
Even if they hint or change the smallest item or verbiage we are back to December lows faster than you can say, “A change in forward guidance.”
And the other truly ironic part is not only do they know it, but so does everyone else, including the one person the Fed despises the most. And that is where the real irony lays.
© 2019 Mark St.Cyr