The Buzz on Business for March 21th 2024

So listeners to the Buzz on Business Podcast wouldn’t have to, we watched Federal Reserve Board Chairman Jerome Powell’s press conference yesterday afternoon. Our takeaway? Well, there was no twinkle in his eye this time.

Stock Market Report

Stocks partied like it was 1999 after the Fed’s meeting yesterday afternoon—new all-time highs for the Dow, for the S&P, and for the NASDAQ.

• The Dow Jones industrials were up a stout 401 points. That’s a bit over 1%, and it closed at 39,512.
• SP500 was up nine-tenths of one percent, that’s 46 points, and it closed at 5225.
• The NASDAQ Composite was up over 1.25%, that’s 203 points, and it closed at 16,369.
• But it was the small caps that really shined. The Russell 2000 was up over 1.9 percent, 39  points, and closed at 2079.

Bond Market Report

Bonds were mixed, but interestingly, the yield on the 2-year treasury was down—significantly—while the rate on the 20-year was up on the day. Could we be seeing the long inverted yield curve finally beginning to right itself?

• The 2-year treasury closed at 4.613%. That’s off seven basis points from Tuesday’s close.
• The rate on the 20-year was up less than a tick, basically flat, and it closed at 4.549%.

Oil, Gold, and Bitcoin

• Oil gave back some of its recent gains. It was off a dollar two and closed at $81.42.
• Gold was up $27.10, and a troy ounce now changes hands at $2,186.90.
• Bitcoin was up $1457.10 and, at 4:00 PM Eastern Time, stood at $65,906.84.

Walsh Reacts to Fed Meeting, Press Conference

So, what are we to make of the Board of Governors of the Federal Reserve meeting that ended yesterday?

Well, it seems obvious to us that the Fed went out of its way to give the impression that nothing much had changed. The Fed’s statement was almost word for word, identical to the one it released six weeks ago and six weeks before that.

The dot plot. The estimate of future interest rate policy submitted anonymously by the Board of Governors changed but not by much. According to the statement and the dot plot, there are still three interest rate cuts in the offing this year.

But things have changed. They’ve changed a lot. Twelve weeks ago, it did indeed seem like inflation had been beaten. Since then, we’ve had four straight months where inflation has increased month over month. And in this most recent month, it increased dramatically.

After all, one of the ways that we can tell that inflation is in retreat is if, ya know, the numbers are going down. They’re not. They’re going up.

And another thing that has changed is the demeanor of Chairman Powell during his press conference. Back in December, there was an air of triumphalism in his speech. There was a twinkle in his eye. The markets took off as a result.

Not so yesterday, in our opinion. The Chairman seemed defensive, a little snippy and no one in Washington chooses their words more carefully than the Chairman of the Federal Reserve Board. His attitude very much was we will have to wait and see.

Indeed, we must.

The economy is fine. Corporate profits are strong. But interest rates are probably not going down anytime soon, and maybe not for quite a while. And yesterday’s rally seemed to assume we are in a declining inflation and interest rate environment. So far as we can tell, we are not.

As we said on this podcast some months ago, periods of high inflation typically have a double-peak pattern. Inflation spikes, retreats, and then spikes again. Hopefully, the Fed will stay vigilant, manage its adversaries in the political branches, and beat this thing.

Next week, the PCE numbers roll out. That’s our next look at inflation. We will have to wait and see.