Will Powell Crash Stocks Again?

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In this video, I discuss the implications of Powell's speech at the Jackson Hole conference yesterday.

Although Powell warned in his speech that he was willing to cause a large amount of "pain" in order to get inflation under control, I continue to believe that the Fed is closer to the end than the beginning. The 2s10s spread is already deeply inverted, signaling that the Fed is already too tight, especially if it goes ahead with its September hike.

I continue to expect the economic data to weaken and for the stock market to call Powell's bluff. Our highly financialized and levered economy is not able to withstand the same level of interest rates that Paul Volcker was able to achieve.

Plummeting tax revenues could lead to a sovereign debt crisis if the Fed continues to tighten and roll off its balance sheet, as the US Treasury is forced to issue more debt into a market where there is no marginal buyer left besides the Fed.

Not investment advice! Consult a financial advisor.

Powell's speech at Jackson conference:
https://www.federalreserve.gov/newsevents/speech/powell20220826a.htm

Don't call it a recession:
https://www.washingtonpost.com/archive/opinions/1978/12/03/yes-well-have-no-banana/ff66f487-7e1a-4579-a199-5750373405c9/
https://www.youtube.com/watch?v=exDVxkLoNUw&ab_channel=TraderUniversity

The Bear Market Is Over:
https://www.youtube.com/watch?v=AIbnO1lQd5E&ab_channel=TraderUniversity

Fed funds probabilities:
https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

Average monthly returns for stock market:
https://www.yardeni.com/pub/stmktreturns.pdf

Debt/GDP chart:
https://fred.stlouisfed.org/series/GFDEGDQ188S

Federal deficit as % of GDP chart:
https://fred.stlouisfed.org/series/FYFSGDA188S

Tax receipts are already falling sharply:
https://www.bloomberg.com/news/articles/2022-08-01/us-treasury-lifts-quarterly-borrowing-estimate-to-444-billion
https://www.bloomberg.com/news/articles/2022-08-22/california-s-july-revenue-falls-12-short-as-boom-times-fade

2021 Jackson Hole symposium speech transcript:
https://www.rev.com/blog/transcripts/fed-chair-jerome-powell-jackson-hole-symposium-speech-transcript-tapering-could-begin-this-year

Powell changes his mind about inflation:
https://nypost.com/2021/11/30/jerome-powell-its-time-to-retire-term-transitory-inflation/

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#fed
#inflation
#stockmarketcrash

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