Powell says "Time-Out"

Powell spoke at the NY Econ Club today. You can find his speech here. It basically confirmed what Waller had said the day before. The pause is in folks. From the CME’s FedWatch tool:

It predicts the pause out to May of ‘24 and then the pivot.

From Powell’s speech:

“Turning to monetary policy, the FOMC has tightened policy substantially over the past 18 months, increasing the federal funds rate by 525 basis points at a historically fast pace and decreasing our securities holdings by roughly $1 trillion. The stance of policy is restrictive, meaning that tight policy is putting downward pressure on economic activity and inflation.”

From Waller’s speech:

“Meanwhile, there has been continued, gradual progress in lowering inflation, and moderation in wage growth. This is great news, and while I tend to be an optimist, things are looking a little too good to be true, so it makes me think that something's gotta give. Either growth moderates, fostering conditions that support continued progress toward our 2 percent inflation objective, or growth doesn't, possibly undermining that progress.”

Fed Pres Waller then went on to list some data that he is watching; yield curve, GDP, consumer spending, manufacturing/construction, labor, and CPI/PCE. Most interesting to me right now is that yield curve.

The long-end of the curve continues to dance its way higher.

I worry that this rapid rise in the yield curve is another sign of dollar liquidity tightness. The other sign is the RRP facility. Which continues to see less demand.

People would rather hold dollars than US treasury bonds. This rush to cash has me moving that way too. I’ve sold some of my holdings and setup stop-loss orders on the rest.

I’m still a believer that oil is going higher

Oil had a big drop off that first week in October. Which now looks overdone as oil snapped back too.

Gold is looking strong as well.

For these reasons I’ve decided to raise some cash.