Failure To Communicate

The Heisenberg profile picture
The Heisenberg


  • Jerome Powell's post-FOMC press conference on Wednesday ended up shifting the narrative materially.
  • It's not entirely clear whether the Fed chair meant to come across as "hawkish", per se, and therein lies the danger of holding press conferences after each meeting.
  • Here's a comprehensive, in-depth take on this week's most important event.

It took roughly six months for me to feel vindicated regarding my long-held contention that Fed Chair Jerome Powell's "plain English" (as he famously called it) approach to communicating with markets would end in tears.

Right up until October 3, pundits and analysts celebrated Powell's "non-academic" approach. But cheers turned to jeers when the Fed chair's tone-deaf characterization of policy as "a long way from neutral" came across as unnecessarily aggressive under the circumstances and set the stage for what would eventually morph into a horrendous quarter for risk assets of all stripes.

Powell's December press conference was, by most accounts, disastrous. Minutes from the December meeting would later reveal that Powell arguably failed to convey the tone of the actual policy discussions taking place at the time, to the detriment of fragile market sentiment.

A related argument of mine from last year was that Powell's decision to hold press conferences after every meeting was a bad idea. It would, I suggested on too many occasions to count, have the opposite of its intended effect. Specifically, I argued that more frequent press conferences had the potential to create confusion, especially if Powell proved to be less-than-adept at communicating.

Wednesday's proceedings were an example of why less is often more when it comes to post-FOMC press conferences. The market went into the May Fed decision expecting a "dovish hold" and that's precisely what the FOMC delivered. The statement effectively downgraded the inflation outlook and referenced the Fed's "patient" approach. The committee also delivered the IOER cut that everyone knew was coming at some point.

Obviously, the Fed has come under immense political pressure to cut rates, despite the US economy expanding at a 3.2% annualized pace in Q1 (the internals from the GDP report weren't great, but the headline print certainly doesn't scream "time to cut rates") and

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The Heisenberg profile picture
Perhaps more than any other time in the last six decades, the fate of markets is inextricably intertwined with the ebb and flow of geopolitics. It's become increasingly clear that one simply cannot fully comprehend market movements without a thorough understanding of concurrent political outcomes. Drawing on extensive experience in both politics and finance, Heisenberg will help demystify a world in which investors can no longer hope to conceptualize of markets as existing in anything that even approximates a vacuum.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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