What did we get from Jackson Hole?
Abraham George Macro Musings
What did we get from Jackson Hole? More jawboning. Chairman Powell no doubt was more hawkish and the markets tanked.
For all the talking that they have done so far, they have not acted so far with monetary policy or with fiscal tightening. So what is the game plan for the Fed? I think they are hedging it both ways. Never in my living memory, the Fed probably has been torn so much between backward-looking data and forward-looking data. Also, they have a lot of pressure from Wall Street talking heads.
There is a lot of data to be released between now and the next Fed meeting. If those data come soft, which I think it will the Fed will be soft on further tightening which should give big support for the equity markets.
The refinancing market in the housing sector is almost dead. Interest rates have more than doubled in that sector in the last year. The bond markets did it for them. The energy issues and the supply chain issues are the real cause of wavering and unstable inflation. This will be a problem and it is long drawn with all political ramifications.
The comparisons that one is making to the 70s and 80s type of inflation have no meaning now. Back then it was much regional and now it is global. The current de-globalization efforts make everything much more complicated too.
After getting his “ transitory inflation “ talk wrong, Chairman Powell has become more dynamic and is behaving like a trader. So far I think he is got it much under control. Threats and some policy actions have worked in controlling the animal spirits in the economy. What probably the Fed wants to do is also avoid a debt default crisis. So it is pressure from all sides including emerging markets.
The pull and push between inflation fears with mounting debt and debt service is something that the Fed did not face in the 70s. So it is all a different game for the Fed now and they are forced to walk a fine line to balance all quadrants.
The biggest tool that they have now is to manipulate the perception. So far they have done a good job at that.
If you received value from this post, and you’d like to send some back, or if you’d like to signal to me to continue spending time on these types of explorations, feel free to buy me coffees (thank you!):
So, there we go. Thanks for reading Breezy Briefings. If you enjoyed this, I'd really appreciate it if you could take a second and tell a friend. Honestly. It makes such a big difference.
Forward this email. Recommend the newsletter. Share on Twitter, WhatsApp, Telegram, LinkedIn, Slack, wherever!
Join Breezy Briefings’ Official Telegram Channel: https://t.me/BreezyBriefings
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and multi-billion dollar portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.