Powell's Dove Transformation

I just listened to the Fed press conference, and my take is that Chairman Powell has decidedly turned dovish. 

Even though he re-emphasized that the recent reserve additions should not be construed the same way as the longer-term Treasury purchases of QE, Powell made it very clear that the 2% inflation target is what he is most concerned about.  The USD (as measured by the DXY which I cited yesterday) initially spiked on worries of a “hawkish cut” – that Powell was going to cut one last time and then re-affirm vigilance on when to go back to a hiking stance.  Instead, Powell said that “we are not immune to disinflationary pressures from around the world” and would not look to hike again unless there were sustained signs of a resurgence of inflation.  I think this is very significant.  To me, it shows that Powell understands the concern of a too-strong USD importing economic weakness from abroad and is willing to stay accommodative and even let the economy run a bit “hot” before the next hiking cycle.

The DXY immediately reversed course on this statement:

 

Copyright

© 2019-2020 Akanthos Capital Management, LLC. All rights reserved. Protected by copyright laws of the United States and international treaties. This website may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Akanthos Capital Management, LLC.

About

Kaoboy Musings is a private distribution list/blog that I created to encourage dialogue regarding the economy & markets, geopolitics, investment ideas, and life in general. I have a passion for the markets and investing, and even though I no longer accept investor capital, I try to keep current on global events and opportunities and remain active in the markets.  I’ve always found that writing my ideas down, sharing them with smart people, and encouraging two-way discourse and devil’s advocacy is often the best way to validate or invalidate a thesis and stay mentally flexible.

Disclaimer

Akanthos Capital Management, LLC (“Akanthos”) is an exempt reporting investment adviser with the state of California.  This message is for informational and professional purposes only, cannot be distributed without express written consent, and does not constitute advice, an offer to sell, or a solicitation of an offer to buy any securities and may not be relied upon in connection with any offer or sale of securities.  The contents of this message should not be relied upon in making investment decisions.  The information and statistical data contained herein have been obtained from sources that we believe to be reliable but in no way are warranted by us as to accuracy or completeness.  The accompanying performance statistics are based upon historical performance and are not indicative of future performance.  The types of investments discussed do not represent all the securities purchased, sold, or recommended for clients.  You should not assume that investments in the securities or strategies identified and discussed were or will be profitable.  While many of the thoughts expressed in this message are stated in a factual manner, the discussion reflects only Akanthos’ beliefs about the financial markets in which it invests portfolio assets.  The descriptions herein are in summary form, are incomplete and do not include all the information necessary to evaluate an investment in any investment or strategy.

%d bloggers like this: