Powell Sleeps Well but Should We?

Powell Sleeps Well but Should We?

Fed President Jerome Powell gives his semi-annual address to Congress this week during a potentially volatile week for stocks.

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On May 29th, President Trump announced $50 Billion in tariffs on China, a development most market participants called “gamesmanship” or “art of the deal” at the time. In other words, the President would never go through with it, but go through with it he did, at least the first $34 billion of it. The additional $16 billion is due next week and $200 billion more is being talked about. This has been seen as a horrible development for global demand and the world economy but since the lows of the 29th, the Dow is up 3.1%, the S&P 500 is up 4.6%, and the NASDAQ is up almost 7.8%. It with this backdrop that Federal Reserve President Jerome “Jay” Powell delivers his semi-annual testimony before Congress on Tuesday and Wednesday (Tuesday before a Senate panel and Wednesday before a House panel).

Jay Sleeps Pretty Well

It is also with this backdrop that Jay Powell made the somewhat casual statements that he made on July 12th in an interview with Marketplace. "I think the economy's in a really good place. As I mentioned, unemployment is now four percent," said Powell. "I sleep pretty well on the economy right now." He added, "Inflation has gradually moved up and it's now just touching two percent. So we're really close to our target. I wouldn't say we've fully achieved it yet. We're not declaring victory there," said Powell. "We want inflation to be symmetrically around two percent, so just kind of reaching up and touching it once doesn't fulfill that goal. And you know the labor market is very strong by any measure. So I think we're in a good place." He also mentioned that wages are starting to go up and he thinks we are seeing price starting to rise. This does not sound like someone who is worried about tariffs and the Dow, S&P 500 and NASDAQ are not trading like they are worried about tariffs. We think when no one is worried, you should worry. 

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