TGIF for sure – these are busy weeks for TPW Advisory given our process of writing our Monthly at month end (5k words, 20+ charts & tables from 16 different research sources) then reviewing/updating our two Model Portfolios (Global Multi Asset flagship & TPW 20 thematic) complete with client notes this week BEFORE writing today’s Musings!
Add in this week’s Fed meet and today’s job report and our heads are spinning & eyes bugging out… so let’s take a deep breath and muse on.
First thing that comes to mind is Chair Powell’s press conference where he once again flipped markets from green to red with the power of his words.. every parent should study him because “listen to my words” works so well for him – when our kids were young I do not recall my words having the same effect. Do you?
Different folks are focused on different parts of the presser but our focus was on Powell’s comments regarding the asymmetric risk the Fed faces between doing too little and letting inflation rip and doing too much, crushing the economy to get inflation down to the 2% level. Powell noted that in the latter case the Fed can always cut rates and yes we should all be happy that the Fed & ECB are well off the zero bound. Powell further noted that if the Fed does too little, it risks letting inflation get out of control – an asymmetric risk he & the Fed are unwilling to take.
This is where we see the battle lines being drawn because there is a growing body of opposition to this perspective. This opposition focuses on the value of having the best DM job market in roughly 50 years & its importance given the political – class divides roiling the West. We see this as the coming policy fight between those who are willing to crush the economy to get inflation to (a completely arbitrary) 2% target and those who see more value in keeping more people employed via an inflation rate of say 3%.
We have a clear dog in the fight