Jakobsen: Begynd hjemtagning af profit i aktier, øgede risici forude

Fra Steen Jakobsen, Saxo Bank:

Saxo comment:

Likeable as he is Mr Powell – he is clearly out of his depth with economic press conferences…

The below highlighted ”up and down” suggestion on rates just one of several “odd” comments from him…

I in particular noticed:

The response that this is a mid-cycle adjustment and not part of a longer term accommodative stance has raised concerns

Anyone is entitled to his or hers opinion, but NOWHERE can this be mid-cycle anything!!!!!!

View from here:

• Fed overall was slightly hawkish, mostly because of the clumsy press conference by Powell.
• Two dissidents not a “scandale” but remember Fed when it turns NEVER only moves once – again the overconfidence in the US economy is almost hilarious considering manufacturing break-down, freight and housing market ……plus geo-political risk still in place
• Our timing model has an AUGUST TURN – which I will elaborate on next week… but it means NOW is time to book the profit and/or froth from this year…
• There will be ACTION and soon from Mr. Trump – He will by this time tomorrow have restarted his attack on Fed, but most importantly the strength of the dollar.  The Dollar weaker will be driver for White House combined with China trade deal into the election year. FX is something no one really understands and hence its easy to “solve” and “sell” to voters…….
• We expect the hawkish tilt – which may be misinterpretation of Powell to be replaced by additional easing pressure by September, but in meantime the market and dollar is at risk…next up is the big fiscal expansion to safe the little growth the world has…

If one had to summarize Powell’s press conference, in which he was so dazed and confused after facing a barrage of questions forcing him to explain just why he is cutting rates now when in the Fed’s own words the US economy is doing great and “confidence is rebounding”, and just what a mere 25bps “insurance” cut will achieve that it was painfully uncomfortable to watch, it was with the following two quotes:

·       POWELL: THIS ISN’T THE START OF A LONG SERIES OF RATE CUTS

… but

·       POWELL: I DIDN’T SAY IT’S JUST ONE RATE CUT

And as markets shook, stunned by Powell’s revelation that today’s rate cut was just a “mid-cycle adjustment”, with the Dow Jones plunging briefly by over 400 points as hopes for an easing cycle were promptly dashed, Wall Street analysts sent out their hot takes of what Powell just did and said. Courtesy of Bloomberg here are some of the most notable responses, besides today’s winner from Chris Rupkey of course:

Delores Rubin, a senior equity trader at Deutsche Bank Wealth Management

“The market was fine with the statement, but as seems to be the case, the press conference reveals details that do not sit well with the market. The response that this is a mid-cycle adjustment and not part of a longer term accommodative stance has raised concerns. The market has really talked itself into a need for lower rates. Obviously the FOMC still feels strongly the economy is resilient.”

Zhiwei Ren, Penn Mutual Asset Management portfolio manager.“The market pricing is for 3 more cuts for the next one year. He is pushing back that market pricing. He says this is a mid-cycle rate cut, which means it is 1-2 cuts and done…he is not giving the market what it wants — three cuts for next year. He basically said ‘At the beginning of the year, we were pricing a few hikes and turned patient — no rate hike, no cut — and now we’re cutting 25 bps. We think that’s accommodative enough.’ he didn’t say they need to cut more. That’s a big surprise to me and the market.”

Max Gokhman, the head of asset allocation for Pacific Life Fund Advisors.

“Two possible reasons. One is that the market thinks an ‘adjustment’ is a one-and-done thing. I doubt that’s the case, especially because there was also language in the statement about the ‘future path’ of rates being a subject of future data. To be clear, I’m not saying the market isn’t worried that it’s one-and-done — that’s just not how I’m seeing it. The second reason is perhaps the market thinks that when Powell says “mid-cycle” he is giving credence to the (ahem) fact that business cycles have a beginning, middle and… END. Most likely the first reason is what moved prices though.”

Charlie Smith, founding partner and chief investment officer at Fort Pitt Capital Group in Pittsburgh.

“The catalyst for sell-on-the-news was that phrase. He made it explicit — basically, that’s what that phrase means. An insurance cut implied ‘Hey, it’s just an insurance policy. It’s a one-time premium and we’re done.’ And then he made it explicit with that sentence and the market figured it out.”

Matt Maley, equity strategist at Miller Tabak + Co.

“His comment about an ‘adjustment’ probably means that those looking for an aggressive easing cycle over the next six to nine months are not going to see it. What it means is that there was a divergence between what investors were saying and what they were pricing in. Investors wanted Powell to say that he’s cutting, but they really wanted to see the Fed embarking on a rate-cutting cycle. The consensus belief on what the Fed would do was correct. It’s just that the markets pricing in an aggressive cycle of rate cuts were way off.”

And now, we wait for Trump to tweet his reaction to his demands for a rate cut… when what he got was a stock plunge and a dollar surge.