The US bond market was closed due to the Columbus Day holiday. Other government offices were also closed. So there were no economic releases to speak of today from the US (or Canada as well).
However, US stock markets were open, the forex market was of course open, and some Fed governors, a “market magician” and an influential bank CEO gave their thoughts on the economy.
The Fed Governors who spoke were Chicago Fed Pres. Charlie Evans who is retiring in the new year and Fed Vice Chairman Lael Brainard.
Evans is more of a dove and spoke more positively saying inflation could be brought down relatively quickly without the risk of a recession or higher unemployment. He spoke more about the Goldilocks storyline and with his retirement at the end of the year, it makes sense that what he says isn’t too harsh.
Fed’s Brainard, was also a bit less hawkish, opting to remind markets
- So far this year, output has slowed more than expected, suggesting that the policy tightening is having some effect.
- The stock of excess savings held by households is around 25% lower, which could imply a more moderate pace of consumer spending going forward than expected.
- Monetary policy will be restrictive for some time
The Fed should move deliberately to assess how the economy, employment and inflation are adjusting; to inform the path of the key rate
The market assistant’s comments came from Paul Tudor Jones. He said these will be very difficult times for the Fed. That he expects wage increases of 5-10%, which would make it difficult for the Fed to meet its 2% target. He warned that we will have to struggle in the short term to make long-term gains, and that the 2020s would be a time when the focus will be on debt dynamics after the experimental period when yields were depressed. . He’s fine with cash as long as central banks don’t get out of their inflation-fighting mode.
The CEO was JP Morgans Dimon who in an interview said shares could rise another 20% and the US was at risk of going into recession in 6-9 months. He sees rates rising more than expected and the next move could be more painful for investors. He argued that QT will be a problem and that the Russian war is also a problem that could upset the apple basket.
Dimons’ comments hurt stocks and sent the dollar higher. While Brainard’s comments calmed the markets down a bit.
Nevertheless, US stocks closed down for the 4th day in a row, led by the Nasdaq which fell just over 1%. The S&P intraday extended below its 200-week MA near 3600. The low reached 3588, but bounced back and closed at 3612.40.
The price of gold moved away from $1700 to hit a low of $1665.78. The price is trading at 1667.60, down -$26.10 on the day.
Bitcoin is trading below the $20,000 level at $19,238.
In forex, the USD is the strongest of the majors. The AUD is the weakest as it is trading at the lowest since April 2020 (and a new low in 2022). USDJPY moved closer to the 2022 high at 145.90 which drew intervention from the BOJ a few weeks ago. USDCHF is approaching its 2022 highs between 1.0049 and 1.0061. The price came back above parity at 1.0010 before falling back at the close. The price is trading at 0.9995.