Tom Nash
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The minutes of the latest Fed meeting reveal the ugly truth about the FED's future plans
🕑 Added 2023-01-06 09:13:48 +0000 UTCLooking at the latest FED minutes you can see the same old rhetoric: the Fed remains committed to bringing inflation back to target. Great. Not surprising to hear that, but in those minutes there is something important you need to pay attention to carefully.
Not a single participant believed that it would be appropriate to reduce rates in 2023. The opposite, more increases are expected, at least to a 5% level during the next 12 months. If you take one thing from this, take this, these minutes reaffirm that the Fed is NOT finished hiking interest rates. Even with the Fed's past actions, and multiple mistakes, like calling inflation transitory, these statements have to be taken seriously.
The minutes clearly show what is the indicator the Fed is examining, the Job market. Thus, as long as the unemployment rate remains low, they won't even consider looking at slowing down their restrictive policy.
If you read the minutes, its clear that the Fed is much more fearful from pivoting too early, than causing a recession: "An unwarranted easing in financial conditions, especially if driven by a misperception by the public of the committee’s reaction function, would complicate the committee’s effort to restore price stability”.
We are being used as the offering to the inflation gods, and by we I mean the middle class, and saying that is unfair won't do you any good, it is what it is. The question, how do you take this info and make lemonade of these lemons?
Here is the unpleasant truth: The projections inside the Dec. 14 minutes show an utter unanimity about the future of interest rates in 2023, with 15 out of 19 members saying 2023 will end with rates of 5.25% or 5.5%.
Fantasy and hopium about growth stocks in this reality is a bad idea guys. Do not ignore the obvious risk here due to some emotional hope to make big money on the bounce. Amazon just fired 18,000 people, Salesforce terminated 7% of its workforce, same with Goldman Sachs and many other companies. Things are not getting better in 2023. At the very best we will see a sideways stock market in 2023, and at the worst its another 30% down for the SP500.
Please be careful.
Comments
weenerdoggs
Well said!
