Fed Chair Powell Gets Antsy - Near-Term Risk

In this video I talk about near-term risks that could follow through the summer. That may start tomorrow. I'll touch on some of those points here below.

Fed Chair Powell Speaks Tomorrow To Congress

Fed Chair Powell speaks to Congress tomorrow. In the face of a down stock market and war, the Fed may need to get more aggressive on their tightening campaign. That adds risk to markets. That added risk starts tomorrow.

The Fed has slow-moed it's response to inflation. We've told subscribers that they've been way behind which can likely lead to a Fed slam-on-the-brakes moment for markets where they'll have to catch up with rate hikes.

They're talking about 25bp or 50bp at their next meeting. Tomorrow's testimony is in front of a frustrated Congress. Congressional constituents (the people that vote for those people in Congress) are aching from higher prices. This war is going to further cause higher prices with oil spiking. So Congress tomorrow is going to grill Powell.

The Fed, in response is going to have to explain why they've been so late to tame inflation. Real rates are big negative right now. I think the Fed tomorrow is going to have to now express the need to pull forward rate hikes to do their part to stop inflation.

Stock Market's Down But Calm, But...

I've been telling subscribers that to call yourself bearish you need to see (NYSEARCA:SPY) and (NASDAQ:QQQ) both down 3% or more in a day. We haven't seen that.

I'm short-term bearish because of direction but to be medium term bearish I'd like to see that.

For now the Fed is holding up the party by still being in their buying for their balance sheet. That Fed buying of securities, they've said, ends this month. I think it ends early this month. Thereafter this market can get much more volatile. I think after Fed buying is done this month it can surprise buy-dippers which can turn into uh-oh sellers when they see less support for markets.

Conclusion

The stock market's down but not a disaster. The Fed's still holding things up. But their messaging near term could start to get more hawkish starting tomorrow.

© seekingalpha. Copyright and all rights therein are retained by authors.