What My Fancy-Schmancy “Fed Hawk-o-Meter” Says About the Fed’s Next Rate Move

Folks lining up on both sides of the fence.

My Fed Hawk-o-Meter, applying its analytical magic to the just released minutes of the June 18-19 FOMC meeting, dipped by one point to 20, hovering now in the lower range of the red-line zone, indicating that a rate cut is moving closer as a possibility but is not yet a clear decision:

My fancy-schmancy Fed Hawk-o-Meter analyzes the minutes of the Fed’s meetings for tell-tale signs that the Fed sees the economy as very strong or overheating (rate hike); as strong but not overheating (rate unchanged); or as spiraling down (rate cut).

It attempts to clarify in a quantitative and visual manner what the Fed wants to communicate to the markets for the next meeting. The Hawk-o-Meter does so by counting how often “strong,” “strongly,” and “stronger” appear in the minutes to describe the current economy. In the minutes of the June 18-19 meeting, those words appear in this sense 20 times, down from 21 times in the prior meeting minutes.

The three-meeting moving average of the Hawk-o-Meter reduces the volatility in the “data” and clarifies the trends:

The average mentions of “strong,” “strongly,” and “stronger” per meeting minutes between January 2012 and December 2017 was 7.4 times. The 20 mentions in the June meeting minutes represented an increase of 170% from the pre-redline average.

“Strong,” “strongly,” “stronger” appeared in phrases such as these:

  • “The information available for the June 18–19 meeting indicated that labor market conditions remained strong”
  • “Federal government purchases were being boosted by strong increases in defense spending”
  • “Gross issuance of corporate bonds was strong in May”
  • “Issuance in the institutional syndicated leveraged loan market was subdued in April but rebounded in May, reflecting strong issuance beyond that associated with refinancing of maturing leveraged loans”
  • “A couple of participants, however, pointed to signs that investment might pick up, including reports from some contacts that their orders and shipments remained strong and that some contacts planned to hire more workers”
  • “Consumer spending had been solid, supported by a strong labor market and rising incomes”
  • “In their discussion of the labor market, participants cited evidence that conditions remained strong”
  • “Reports from business contacts pointed to continued strong labor demand, with many firms planning to hire more workers”
  • “While strong labor markets and rising incomes continued to support the outlook for consumer spending…”
  • “The Committee retained the characterization of the most likely outcomes as “sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective” but added a clause to emphasize that uncertainties about this outlook had increased.”

I scrubbed two false positives:

The words “strong,” “strongly,” and “stronger” actually appear 22 times in the minutes, but in two instances, they were used in a clearly different context that made them “false positives,” and I scrubbed those two from the tally:

“Total nonfarm payroll employment expanded solidly, on average, in April and May; however, job gains slowed sharply in May after a strong increase in April.”

“Some participants suggested that although they now judged that the appropriate path of the federal funds rate would follow a flatter trajectory than they had previously assumed, there was not yet a strong case for a rate cut from current levels.”

That was quick: “Patient” disappears.

And the new key word, “patient,” introduced with such market-moving oomph in December, has essentially disappeared, after having been used in the minutes of the prior meeting to indicate, interestingly, that the Fed would also be patient with rate cuts. The word seems to have served its purpose and is being retired. It was mentioned only once, and only to show that the word would be “removed” from the language, in this sentence that is also interesting for another reason:

“In describing the monetary policy outlook, members agreed to remove the “patient” language and to emphasize instead that, in light of these uncertainties and muted inflation pressures, the Committee would closely monitor the implications of incoming information for the economic outlook and would act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.”

The above sentence also expresses the Fed’s intention to watch the data before moving on rates, and that there were not yet any foregone conclusions: Additional weak data could push them one way; additional strong data could push them the other way.

Where is the Fed’s “U-Turn” that Wall Street promised us? Read...  Fed Sheds $38 Billion in Treasuries and MBS in June, Dumps MBS at Record Pace, Exceeding “Cap” for First Time

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  68 comments for “What My Fancy-Schmancy “Fed Hawk-o-Meter” Says About the Fed’s Next Rate Move

  1. Hedger
    Jul 10, 2019 at 3:27 pm

    Like the charts, but I’m not quite sure why you keep alluding to the possibility that a Fed Rate Cut will not come. There is a 100% probablility of a cut at the end of July. It would be interesting if your chart could predict whether a 0.25 vs 0.5% cut is more likely.

    I watched today’s Powell testimony. He said he will do what’s necessary to ‘maintain the expansion’. I’m not sure if that is one of the Fed’s mandates.

    • Jul 10, 2019 at 8:17 pm

      Hedger,

      ALL YEAR, people have said we’d get a rate cuts at the “next” meeting. Fed funds futures indicated a fairly large probability of a rate cut in June. There was none. And they said we’d get a 50-bps cut in July. Now a few outlets are backpedaling from the 50-bps cut.

      All I do is look at the data as I see it. The media has become completely unreliable on this topic. All year, they have twisted everything Powell said, no matter what, into a “rate-cut soon.” So far they’ve been wrong.

      But my data says that the Fed is now undecided, going forward. It was decidedly in the “no-rate cut” camp in June. Now it is undecided going forward, waiting for more data.

      I tell you, I think this has been the hardest thing I’ve done in my life, trying to keep a cool head and keep looking at the data, and keep presenting the data, during these 7 months of pandemic rate-cut (and QE) cacophony.

      It would have been a lot easier to just jump on the bandwagon and predict a rate cut for the May 1 meeting and then a cut for the June meeting — and ZIRP by the end of the year, along with a general collapse of everything. It would have been a lot more fun, and not as lonesome, and maybe more people would have clicked on my articles, and I might have made more money off the ads :-]

      • Keeper Hill
        Jul 10, 2019 at 8:37 pm

        June was never at 100%. June was always a maybe.

      • Wes
        Jul 10, 2019 at 8:42 pm

        Good observation Mr. Richter. It looks like the FOMC is waiting for the tariff war with China to be resolved first. If this happens before September the FOMC may put the rate cut on hold.

        • RangerOne
          Jul 11, 2019 at 10:22 am

          I wonder if Trump is going for pure theater and will try to wrap up the trade war just before the election.

          Almost any end will likely be some form of victory that could boost his reflection position.

          That would fall partly in line with how the veiled tax threat against mexico came and went.

          They must have some idea by now of what would be needed to deescalate the trade war and have simply been holding out to wear down the other side.

      • Jul 10, 2019 at 8:56 pm

        BTW, just before the Fed meeting, we will get two hugely important data releases:

        Jul 26: Q2 GDP (advance estimate)
        Jul 30: Personal Income and Outlays for June.

      • Old Engineer
        Jul 10, 2019 at 9:58 pm

        Your logic is flawless and I share your angst. But I think the Fed really doesn’t know what to do. I think they realize things are out of control, but the only palatable option for them is to try to keep things going. And that means supporting more borrowing, which means lower interest rates.
        In addition, stock values are no longer very tightly coupled to financial realities but rather to the Fed’s interest rate manipulations. So there is a lot of pressure on the Fed to keep lowering rates since nothing else is keeping the market afloat.
        We are living in interesting times, times that try men’s souls.

        • TriffinsDelimma
          Jul 11, 2019 at 5:21 am

          Back in the 1970’s when Volcker raised rates to 22% nobody seemed to care or worry about the ramifications, or who got hurt, …
          Now ya”ll talk like a 0.00025 change will rip apart the universe, my how times have changed.

          The problem is USD must have high rates, or otherwise why would INTL PPL bother with dollar? This is the curse of being the reserve currency, does anybody who runs the USA care about the USA ppl? I think not, that has been proven over&over. PPL in Wash-DC rule the world, and the ppl inside the wall can be fed anything. Nobody in DC cares about the USA population. They’re just ‘things’ to be managed, or corralled, and bred for Epsteins Resorts.

          Lastly, there are a lot of us that want to return to the good old days of 8% ROI, with no risk :)

      • Jul 11, 2019 at 11:22 am

        It’s done. Question,”What data are you most interested in?” There is an obvious answer, one that would have given the markets some way to gauge Fed opaqueness. His reply, “Oh we look at lots of data, tons of data, all the data, my eyes are tired of looking at so much data..” He will be bowing to political pressure and the fed mandate not to mess with markets in an election year.

      • raxadian
        Jul 11, 2019 at 2:09 pm

        If you keep saying that it is raining all the time, eventually you will end saying that it is raining when is actually raining.

      • d
        Jul 12, 2019 at 3:46 am

        Those who remember getting greenspanned, will look at all this pro what wall-street and the white-house want noise, and say “Yeah Wright”

        Lot of people at going to bet the wrong way and get hammered this coming FOMC speech.

    • Jul 10, 2019 at 9:56 pm

      If you know 100% what the Fed will do, it’s time to maximize leverage and bet on it. Perhaps a bunch of calls on stocks that typically bump to the upside after such news.

  2. Old Dog
    Jul 10, 2019 at 3:30 pm

    Isn’t the QE unwinding equivalent to a stealth hike?

    All things being equal it forces the Treasury to hike the yield of new issues, however modestly. Of course, things are never equal, but in theory.

    • Iamafan
      Jul 10, 2019 at 6:22 pm

      You’re right. During QE unwinding, the Fed did not rollover as much. They rolled off Treasuries. SOMA add-on purchases were much less for eight of twelve months in the year.

      When the Fed buys less, interest rise or rose. I bought Treasury NOTES during these 8 months. When they became dovish and announced the end of QT, they planned to buy more add-ons. The market speculated rate decreases. I had to reallocate my purchases to Bills and FRN only as the rates fell.

      If the Fed lowers their Fed Funds Rate, I might have to reallocate again.

    • Jul 11, 2019 at 11:25 am

      Yes but the level of accommodation globally far offsets their tightening.

  3. akiddy111
    Jul 10, 2019 at 3:31 pm

    Somebody tapped Jay on the shoulder early last January and told him that he is 225 basis points higher than everyone else.

    So he will probably close that gap to nil with rate reductions within 18 months.

    Trump is, thus, set for the elections. Powell is anointed. More gravy for the top 0.1%. Mission accomplished.

    That is my Fancy-Schmansy opinion.

  4. akiddy111
    Jul 10, 2019 at 3:57 pm

    I read another article earlier today with a different bias that was talking about the numerous times “risks and uncertainties” was mentioned in the FOMC minutes.

    We see what we want to see but my gut is that the Fed will bring rates to zero within 18 months. Lowering rates makes most sense in creating higher valuations for global asset owners.

    Moreover, savers are resourceful and frugal enough to fend for themselves.

    Sadly, 50% of the US population own only 1% of the wealth. That’s a big problem that will get worse irrespective of future interest rates.

    Most of the new wealth in the USA (below the top 1%) over the last decade is accruing to Chinese and South Asians. Good for them. They are aggressive and industrious.

    Powell tried rate hikes. It back fired.

    All is well.

    • sunny129
      Jul 10, 2019 at 4:27 pm

      ‘savers are resourceful and frugal enough to fend for themselves’

      Wow!

      So, more financial repression for them, retirees and those on fixed income!

      Debtors keep being rewarded and the savers shafted! Wealth effect is a mirage for those bottom 50% owning 1% but only for top 5% owning over 70%!

      • Paulo
        Jul 10, 2019 at 5:04 pm

        Tax revolt coming by the middle and lower earners? The prisons are already full, so I hear. Okay, tongue in cheek but after awhile people get tired of watching others skate on social obligations, justice, responsibilities, and moral behaviour/norms.

        Just look at Epstein and his friends, yet they’ll all be phoning their pet pols demanding taxes stay low and regulations relaxed. And… drop that interest rate. Fancy schmancy all right, for the rich and connected.

        • Michael Gorback
          Jul 10, 2019 at 5:56 pm

          A tax revolt by the middle and lower earners? Many of them pay no federal tax at all.

        • MCH
          Jul 10, 2019 at 7:04 pm

          Don’t worry, that’s why we have the income redistribution crowd in Congress. I honestly can’t say that they are wrong. But I’m wonder about the mentality it’ll foster. If income redistribution from the top 1% to the bottom 50% becomes a reality, where would that put people’s mindset in terms of how hard they ought to work.

          Anyway, everyone seems to think Powell is going to cut rates. It would be interesting if he didn’t, and tanks the market. But this is just going to end up hurting things. In some ways, the interconnectedness of our economies seem to be a very dangerous double edged sword, we can reap great benefits from it, but we can also get a weird race to the bottom because the Europeans and the Japanese keep wanting to do NIRP or ZIRP. Seems that this ends up increasing the velocity of either the upward or the downward spirals.

          This global supply chain is also seriously screwed up, while it might sound economically efficient, it seems like there are now a lot more single points of failure than ever. Imagine if Huawei ever drove Ericsson, Cisco, and Nokia/Seimens out of business. Then someone gets a strangle hold in a segment of the market.

          I wonder how kind the history books will be to this era 100 years from now. I also wonder what it was like for the world in early 1900s before WWI kicked off.

    • Jul 10, 2019 at 4:43 pm

      Ooops!
      Over the past 300 years short-dated market-rates of interest such as T-Bills go up in the boom and down in the bust.
      And the senior central bank follows the key changes in market rates by some months.
      Within this, the fastest declines in market and administered rates have occurred during the worst part of a bear market.

  5. Mike R
    Jul 10, 2019 at 4:10 pm

    Powell is giving Trump what he wants, which is good timing on a massive rally, that runs well into election season. Right now he doesn’t need a rally, so the Fed will jawbone for as long as possible, to keep the market elevated despite Trumps trade war antics, and other inane activities that might otherwise make the market nervous. The Fed did wonders for Obama, and so obviously it has no problem ceding to a President that is now of the opposite political persuasion. This is their way of saying they are ‘not biased’, when they actually are quite biased, toward pumping and juicing stocks at all and any costs. Don’t get me wrong – I’m not saying Trump controls the Fed – he doesn’t. But the implicit understanding between all big banks, who have members on the Fed board, is not to rock wall street. Mainstreet be damned, and the currency be damned. But Wallstreet – its don’t touch or muck it up. Its a considerable magic act they have pulled off since Lehman, and they seem to be handling DB adroitly too, despite its linkages to every bank on the planet, and derivatives book that would wipe out every other bank where it to go under, and likely totally freeze up the entire world financial system in 24 hours of the bad event, whatever that may be.

    • Bill ted
      Jul 12, 2019 at 12:02 am

      And your prove of this? You seem to be am alex Jones type of conspiracy theories like all democrats these days.

  6. interesting
    Jul 10, 2019 at 4:10 pm

    “Fancy-Schmancy”

    I’ve often wondered how that was spelled……BUT has the FED ever cut rates when unemployment (a fake news number I know) is at an 18 year low?

    Nothing makes sense to me any longer.

    • Rowen
      Jul 10, 2019 at 4:56 pm

      i think they’re trying to maintain asset prices at this point.

    • Eamonn Harter
      Jul 10, 2019 at 6:05 pm

      My guess is that there is something else behind the scenes they know that they are not telling us. The public will know only when it’s too late to do anything about it.

  7. Satya Mardelli
    Jul 10, 2019 at 4:18 pm

    Today in testimony before Congress Chairman Powell said uncertain/uncertainty 27 times.

    Now I’m uncertain what he was trying to say.

    • RD Blakeslee
      Jul 10, 2019 at 5:26 pm

      We need a Fancy-Schmancy certainty/uncertainty Fed Hawk/Doveometer.

      Wolf?

  8. IdahoPotato
    Jul 10, 2019 at 4:22 pm

    So why were 20 year Treasuries down? Is the bond market signaling a bottom in rates?

  9. timbers
    Jul 10, 2019 at 4:27 pm

    Gee whatever happened to targeting assets prices? One word: U-Turn. I saw back in December when that U-Turn happened, what started happening to asset prices… literally almost in my own backyard.

  10. Memento mori
    Jul 10, 2019 at 4:54 pm

    Don’t sweat Wolf, the Fed is going to cut.
    Why is the Fed’s opinion on things so paramount?
    Because due to the lack of real economic growth and recovery, the primary factor in determining market valuations at these levels is the amount of hot money that the Fed is willing to provide into the gambling purses of the Banks. Voila.

  11. Old Engineer
    Jul 10, 2019 at 4:59 pm

    Rates are probably coming down. And it all comes down to borrowing. The new Federal Budget is going to have a blowout deficit increase, again!. And as the deficit balloons the only way to avoid Federal government bankruptcy is to reduce the cost of the borrowing. It is the Argentine approach to government budget management, and you don’t have to be a financial wizard to see the end game, whenever it gets here.
    So, more debt requires lower interest rates.

  12. Keeper Hill
    Jul 10, 2019 at 5:20 pm

    Pretty clear a cut coming after today. If they wanted to change expectations it would have happened today.

  13. OutLookingIn
    Jul 10, 2019 at 5:30 pm

    The Fed attempted to withdraw liquidity (QE tightening) but not at a pace that would cause a liquidity shortage or credit crunch. Its a fail and with that, they have reversed course with a program of further rate cuts and more easing to come.
    They have accomplished their aim of devaluing the dollar and promoting inflation. Which is exactly the goal of the Trump white house.
    The danger being, that this course of action could very well backfire and give cause for a free fall of the dollar and resultant hyperinflation.

    The global debt denominated in US dollars would instantly evaporate, as would the debt owned by the US government. If serious inflation and a dramatic fall of the US dollar are allowed to happen, the consequences will be far reaching and extremely grave. Since most all sovereign foreign reserves are held as US Treasuries and at base, are debt instruments themselves.

  14. Eamonn Harter
    Jul 10, 2019 at 5:58 pm

    With the SPX at close to 3000 and the 5 yr treasury at 1.8% how could a rate cut possibly be advised? Instead, are they worried about a slow down in house sales and a crash in real estate prices? Or is Deutsche Bank the canary in the coal mine like Bear Stearns last time?

  15. Michael Gorback
    Jul 10, 2019 at 6:06 pm

    There are only two things you can count on.

    1. The rich and powerful will do whatever they can – no matter how ultimately destructive in the long run – to preserve their wealth and power.

    2. The financial system is hideously complex and nonlinear. That means a small perturbation in one sector can move everything way across the graph to someplace unexpected.

    Imagine a huge snow pack that is growing increasingly unstable. One day a squirrel drops a nut on the snow pack and it causes an avalanche. That small perturbation results in a huge reaction.

    That’s what financial markets are like, especially now.

    You don’t know which snow pack, which squirrel, or when the nut will drop.

    The people who guessed right will be hailed as financial geniuses.

    • DawnsEarlyLight
      Jul 10, 2019 at 6:18 pm

      I know one thing….. the squirrel will never enjoy the nut!

      • phusg
        Jul 11, 2019 at 5:41 am

        Haha, no the puppet won’t ever be allowed to, but you can bet the ones that sjit in the woods do every day of the year. Thankfully the central banks can’t shaft all savers.

  16. Iamafan
    Jul 10, 2019 at 6:31 pm

    QE and NIRP didn’t make European firms more profitable or productive. DB was the poster child. So I wonder what interest rate reductions will do here except make debt more cheap. I fear the backlash, whenever.

    I don’t remember that low rates was a campaign promise.

    • DavidG LA
      Jul 11, 2019 at 8:15 am

      Exactly. Before he was elected he was actually complaining about the low rates.

  17. Rcohn
    Jul 10, 2019 at 7:15 pm

    Five year Treasuries went down in yield by .04% while the 30 year Treasuries went up in yield by .04%.
    This is very unusual , maybe unprecedented.
    This is telling us that the price for 30 year Treasuries has rallied to irrational levels even as interest rates will fall on shorter term securities

  18. Bet
    Jul 10, 2019 at 7:31 pm

    I think a cut coming The markets now want a .5. So a .25 is now a disappointment and if they get a .5 that too can precipitate a sell off as what does that foretell when markets are at all time highs. Rate cuts are no guarantee that assets remain at these heights. Markets look to be stalling out and distribution will pick up in earnest

  19. FarmLandInvestor
    Jul 10, 2019 at 7:37 pm

    The fed will most likely drop rates 0.25% in July, and another 0.25% in either September or December. For savers, GS still offers 2.8% 5 yr CDs as of today, and 2.6% 3 yr. I personally have 10% of my cash in 2-5 year CDs, averaging 2.95% return. I do not think we will see 3% CDs for at least another 10 years, or longer. Japanification of the US economy seems to be the direction we are headed…

    I believe we are still on track for a 2020 recession. I do not see how the 0.25% to 0.50% in rate cuts will change the real economy, as that card was already played over the last 10 years. At best, we get another 10% euphoria spike (depends on trade war resolution) on the SP500 before a 30% to 60% correction IF we get a 2020 recession. All bets are off for a market mean reversion as I would guess the fed gets approval from Congress to buy stock ETFs once the market pain gets too great for Wall Street. I do think this will be the plan as the fed can not allow even a 10-20% correction, as history has shown over the last six months.

    The sad part is the Fed is systematically destroying free market capitalism. It might take another repeated 10 year liquidity cycle for the American majority to see they have been played by the top 1%. Perhaps with negative rates, helicopter money, and fed funded stock etf buybacks, the next liquidity cycle will last two decades??? That is my best hope as the end game will likely be a global monetary reset in some manner in which we will all lose in some way previously thought unimaginable…

    • Jul 11, 2019 at 7:56 am

      All the data will be falsified in 2020. GDP will come in at 3 percent in the second quarter of 2020 and above 4 percent in the third quarter of 2020. Just like all the total lies today to bring interest rates down next year the opposite will happen. They just invent the data.

    • HollywoodDog
      Jul 11, 2019 at 9:09 am

      FLI, I think your prognosis is pretty accurate. Traditional investment strategies are of no use in a world of free money. I’m continuing to move my funds into CDs paying just about 3%. Powell has clearly indicated that he’s going to keep the low rate party going–and worsen the severity of the impending crisis. I don’t think anyone knows what will eventually bring the house of cards down though. That will probably shock us all.

  20. andy
    Jul 10, 2019 at 8:18 pm

    Perfect timing for insurance rate cut. S&P500 reached 3000. Nice even level to plateau on.

  21. tommy runner
    Jul 10, 2019 at 9:26 pm

    this meet was all btwn the lines. I really think he was talking to the regular jane/joe today. jp realizes some old economic theory’s and beliefs cannot be counted on. he may have wanted to tell people to save every dime they can, don’t believe a word your clueless reps say, or count on any help from them (especially the ones that cant differentiate btwn libor and facegram bux). he can see beyond phils curb and recognizes this is an econ ww and he is more of a general than a chairman. if these times don’t show up in a history book in 100 yrs, look for them in some recent cave drawings. the good news.. tie gm one second on the clock, i think this guys going to want the ball.
    we’ll see

  22. DR DOOM
    Jul 10, 2019 at 9:46 pm

    When ,is not clear but rate cuts and more QE are coming, Powell said today that QE can be put in play.History holds no example of an economic and militarily powerful nation/state reverse its de-basement of coin once it starts down that path. We are heading for a reset that will be catastrophic. Massive inflation could allow the debt to be handled ,but at what terrible cost to the people. Cognitive dissonance and fed watching ain’t a good plan to protect yourself.

  23. otherbrother
    Jul 10, 2019 at 11:20 pm

    I’m pulling for a temper tantrum and hoping all the deep thinking analysis about a 100% rate cut, is 100% wrong — if nothing else, the next meeting should just give a stronger nudge towards a cut, then a message that if needed, they can cut in an emergency …. does anyone sense an emergency here? If the Fed gets too fixated on rate drops, that sends a very short-term message that the global economy is falling apart — I don;t think that’s a message they want to send at this point.

    There’s nothing out there to suggest that the economy is going to collapse in the next 6 months, so why get that ball rolling as fast as possible? Furthermore, with a temper tantrum and equity drop and a flight to safety in bonds, yields will drop anyway and the same goal is achieved, without a rate cut.

    Remember when ==> “The Federal Reserve, working in coordination with other central banks worldwide, enacted an emergency interest rate cut on Wednesday (October 8, 2008)

  24. Jul 10, 2019 at 11:47 pm

    Wolf:

    Strong defense spending makes for a weak balance sheet, does it not?

    Or am I just old-fashioned?

  25. MBP
    Jul 11, 2019 at 1:06 am

    On June 20, USD-Libor went below EFF(~2.37%). As soon as it did, Fed Funds Futures priced in a 100% chance of a July 31 rate cut. That’s all there is to it. The FOMC meeting on the same day was irrelevant.

    • Jul 11, 2019 at 8:32 am

      The 3-month US Libor has no particular meaning other than it follows the 3-month Treasury yield but is slightly higher. The 3-month Treasury yield fell into the 2.2% range and the US Libor fell into the 2.3% rage. This is a chart of both of them overlaid, through the time period you mentioned:

  26. ffrank
    Jul 11, 2019 at 3:22 am

    REAL probability of a rate cut, used by real CME traders (they make money out of it, real money)

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

    Trading numbers never lie.

    CME EuroDollar Future “price action” is also a nice prediction tool on FED moves.
    https://www.cmegroup.com/trading/interest-rates/stir/eurodollar.html

  27. John
    Jul 11, 2019 at 6:26 am

    Hey Wolf! Cacophony, I had to look up that one. I don’t remember how I found your website, but I’ve been right there with you. Like your shadow, or I wish with your travels and all your smarts. I was prepared with your foresight in December. We were looking for a home here in New England and finally in snow, found the house early January when everyone was shocked and scared. It’ s great to to read your writings, and I don’t think money is what it’s all about with you. I could be wrong. Your sense of sanity around insanity helps me feel, not so alone.

  28. Michael Engel
    Jul 11, 2019 at 6:50 am

    Investors are fed up with Fed inflation expectations and deflation expectations manipulations.
    SPX weekly formed a resistance line coming from Jan 2018(H) to Sep(H).
    If this line will not be reached or breached, SPX will lurch down
    in direction to ma200 weekly.
    If correct, if Dec 2018(L) will not be breached, after a low & a test.
    SPX might JUMP above this resistance line to a new all time high.
    A backup to this resistance line will follow. From there, SPX
    move higher, to the sky.
    On Oct(L) get XLB +XLE. Do some research where to invest for LT golden value
    Dump if SPX < Dec 2018(L).

  29. J.M.Keynes
    Jul 11, 2019 at 7:44 am

    – The 3 month T-bill rate is falling and that’s why there will be a ratecut from the FED. The FED follows that one rate.

  30. Gershon
    Jul 11, 2019 at 8:20 am

    Central bankers are gearing up for another counterfeiting spree, but how long will they be able to defer the inevitable financial reckoning day and true price discovery? How long will what’s left of the middle class let these Keynesian fraudsters destroy the purchasing power of their dollars, euros, pounds, etc. and rob them through the stealth tax of inflation?

  31. Iamafan
    Jul 11, 2019 at 8:22 am

    Let’s keep it simple. The reason why we are worried and the reason for our problems is beacuse we have TOO MUCH DEBT.
    You cannot reduce the debt by lowering rates, you can only make the debt payments smaller.
    Eventually you still need to pay the debt.
    HIGHER interest forces people to live within their means.
    Non-manipulated markets make people choose to pay down debt rather than speculate.
    If and when you get a disease, you need to understand the difference between a drug (or therapy) that will cure you and that which is just a palliative and help reduce the pain.
    Right now LOW interest is just an OPIOID. It won’t solve our real problems. Maybe it is time we face our problems head on.

  32. nick kelly
    Jul 11, 2019 at 9:43 am

    Core inflation just hit 1.5 year high.

    When this sad era in the history of the Fed is written the question will be: how was it complicit in destroying its independence. Not just too much happy talk but too much talk in general. Too many ‘fire side chats’

    Does Powell have kids? Doesn’t he know you can’t say ‘and maybe we’ll stop for ice cream’ and not have the kids assume a 100 % certainty of a stop? Imagine the uproar if he then said he’d changed his mind.

    The market and WH are blackmailing the Fed by pointing to talk that suggests a rate cut, even though the Fed has said ‘data dependent’ a few million times. The only data that suggest a rate cut are due to the self- inflicted harm from the tariff wars.

  33. Jul 11, 2019 at 11:40 am

    The one anomaly was Powell’s [feigned?] concern for the global economy. He walked away from dollar policy, fiscal policy, and he cares about them? 44 dithered before he dropped Bernanke, appointed Yellen to ostensibly address lack of concern for main street, and 45 dropped him because Yellen was too much of a globalist. His Fed pick embraces the impact of a slowdown in Europe? Does a rate cut help Main St or Wall St, and foreign investors? You can spray all the glyphosate you want, the same old weeds keep popping up?

  34. Jon
    Jul 11, 2019 at 1:27 pm

    This blog is awesome and thanks a lot to Wolf.
    I feel grateful among the wise people here.

    Anyone who is saving money would be punished the way they have been punished in last few years

    I am all in stocks and it may crash but no one knows when and how

    How can we profit from this ?

    How can we get actionable info from all this collective wisdom

    Thanks

    • The Colorado Kid
      Jul 11, 2019 at 2:00 pm

      Jon, all you can really do, unless your surname is Druckenmiller, or maybe you want to try and run a Home Office is to find a Portfolio constructed with non correlated assets and rebalance slightly more than once a year if held in a taxable account, or more if held in a ROTH, or a Tax Deferred Account.
      Go over to portfoliocharts.com and find a portfolio that you can live with and start to implement it. You will probably fare far better than the average investor will over time. This won’t let me back up, so I meant rebalance AFTER a year to help mitigate short term capital gains tax. Good Luck & remember Harry Markovitch said that diversification is the only free lunch in the investing world.

  35. raxadian
    Jul 11, 2019 at 2:05 pm

    I don’t see a rate cut happening this year because the numbers, as show on articles on this site, don’t support that yet.

    The economy is still going strong and as Wolf likes to say like a parrot, these are still the good times.

    If these are the good times, if the FED is getting what it wants without rate cuts, why would it do rate cuts?

    There are fears and projections that show numbers might get worse later this year so in that case a rate cut might happen.

    Personally I think we won’t have rate cuts until next year since then is when the economic tailwind will be really gone.

    Having a rate cut this year, even if it’s a single one in late December, would need the numbers to become bad.

    Does anyone see the numbers becoming bad enough yet? As in this year?

  36. otherbrother
    Jul 11, 2019 at 2:34 pm

    Powell Sounds Dovish Enough to Open Door for a Half-Point Cut
    By Craig Torres
    July 10, 2019, 2:51

    “If the economy is really slowing down, and you are hit by shocks that could tip you over,” a quarter-point cut “is not a defensible move,” said Seth Carpenter, chief US economist at UBS Securities Inc in New York. “They are shifting from data dependence to risk management.”

    A half-point cut could be a risky move. It might suggest to investors that there is some emergency afoot that they don’t yet see. It would also, no matter what Powell says, have political overtones.

    “I don’t think it is a likelihood,’’ said Julia Coronado, president and founder of Macropolicy Perspectives in New York. She said Powell’s strategy is a “methodical recalibration, rather than an emergency or breaking out the big guns.’’

    • The Colorado Kid
      Jul 12, 2019 at 1:03 pm

      The FED & Trump want a weaker dollar. One way to get a weaker dollar is to cut rates.

  37. HS86
    Jul 14, 2019 at 2:10 pm

    Hello Wolf,

    I don’t know this so perhaps your explanation on the history history of the Fed’s dual mandate is in order.

    But the Fed’s June statement “..the Committee would closely monitor the implications of incoming information for the economic outlook and would act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.”, could I read it as the Fed’s paradigm shift to initiate a THIRD mandate, pressured into it by the administration? What does “sustain the expansion” even mean?

    Also, what’s the story with the little smiley at the bottom right corner of the page?

    Thanks!

    • Jul 14, 2019 at 2:21 pm

      HS86,

      “Also, what’s the story with the little smiley at the bottom right corner of the page?” I don’t see that smiley. It’s not on my site, as far as I know. It may be something on your device. If it persists, you might try to clear the cache of your browser (delete browsing history). If it still persists, and if it only shows up on my site, you can take a screenshot and send it to me, to the email in the “Contact us” tab.

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