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Ep 53: What Fed Chair Powell Said And What The Markets Heard

Tematica Research profile picture
Tematica Research

In this week's episode of the Cocktail Investing Podcast, mixologists Lenore Hawkins and Chris Versace parse the testimony from new Fed Chief Jerome Powell delivered before Congress this week. Why, you ask? One reason was the investing herd's reaction as the stock market dropped a quick 300 points following Powell's comments during the Q&A session. Second, as we've been saying, the market is increasingly focused on what the Fed says and may do when it comes to monetary policy. This has made the Fed the market safety net over the last several years, but what did Powell say that might signal, as Bob Dylan sings, "the times are a-changing."

We know the stock market and its investors are no fans of change, let alone a potentially abrupt one, but when Lenore and Chris look at the crop of economic data through their thematic lens, it leads to more than a few questions about the vibe that Powell was trying to lay down. While Powell sounded a bit more hawkish than his predecessor Janet Yellen, we find it a challenge to get overly bullish only the economy when the Citibank Economic Surprise Index goes negative for the first time in 18 months, and more data is missing expectations instead of knocking it out of the park. True to form, Powell once again voices the view that the lack of inflation is "transitory" but as Lenore and Chris there are several thematic reasons to think it's more of the new normal than not.

Is Powell laying the groundwork for what's to come or simply using a common Fed Chairperson tactic of the last decade - jawboning to get the stock market in line and reset investor expectations? We discuss that and much more as we parse the Powell testimony, and share our views on what's really

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Tematica Research profile picture
We see Investment themes at work and at play every day in the economy — oftentimes across industries and categories — and other aspects of day to day life. It is the opposite of the typical Wall Street approach to research, which oftentimes overly focuses on a single industry at a time and results in missed opportunities. These themes are identified by looking at the intersection of shifting economics, demographics, psychographics, technologies, mixed in with regulatory mandates and other forces. In other words, looking at the real world that companies are operating in! Some businesses will adapt, while others will leap frog ahead riding these thematic tailwinds to profits and significant share price movements, and sadly there will be those left floundering too. For every Apple, there is a Palm and Blackberry. For every Facebook . . . a MySpace or Friendster. For every Netflix, there’s a Blockbuster. The list goes on and on, even in non-technology categories. By examining these thematic tailwinds, our goal is to identify mispriced securities relative to the business opportunities ahead and avoid those that are overly valued and or staring down the barrel of significant headwinds

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Comments (1)

24927873 profile picture
Now that is some real talk. The unraveling of our economic mess is becoming more aparent. Thanks for sharing.
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