According to reports, Wall Street is getting ready for major inflation data. Michael Schumacher from Wells Fargo Securities warns that Fed is not a friend. Michael Schumacher warns that Jerome Powell of the Federal Reserve may hold interest rates that are higher for longer, and it can leave investors on the wrong side of the trade.
Over the last 15 years, the Federal Reserve came to the rescue whenever there was weakness. But this is not the case this time. The Federal Reserve cares about inflation, and that is just about it. The Labor Department shall release its January month’s consumer price index. On Tuesday, it shows costs for goods and services. On Thursday, the producer cost index takes the spotlight.
How Michael Schumacher sees the country’s economy?
Michael Schumacher said that inflation could come off a bit. But they still do not know what the destination is. And that makes a massive difference to the Federal Reserve. At this point- 3 per cent, 3.25 per cent, and 2.75 per cent are up in the air. Michael Schumacher further warns that the early momentum of the year cannot co-exist with a Federal Reserve that wants to battle inflation. He said that higher yields do not sound good to stocks. He thinks that the market optimism shall ultimately fade. So far, this year is concerned, the Nasdaq is up 14 per cent, and the broader S&P 500 is up 8 per cent.
Michael Schumacher still likes the two-year Treasury Note for relative safety and some upside. He recommended it during an interview- “Fast Money” in September 2022. He had said that it is a good place to hide out. Now, the note is yielding 4.5 per cent, which is a 15 per cent jump since that interview. Michael Schumacher’s latest forecast calls for three more quarter-point rate hikes this year. So, that should support better yields. Schumacher notes that there is still a chance that the Federal Reserve chief Powell can shift course.
Michael Schumacher said that several folks in the committee lean fairly dovish. He further said that if the economy looks weaker, if the jobs picture fails a bit, they may talk to Jay Powell of the Federal Reserve and say they cannot go along with additional rate hikes. They need a cut or two soon.
Who is Michael Schumacher?
Michael Schumacher from Wells Fargo Securities is the head of the macro strategy. He joined “Fast Money” to discuss why rising mortgage rates can be causing trouble for the U.S.A.’s economy.
Who is Jerome Powell of the Federal Reserve?
Jerome Powell is the Chair of the Federal Reserve of the United States. He was confirmed for a 2nd 4-year term as chair in May 2022. Jerome, or in short Jay Powell, is an American attorney by profession and investment banker who has served as the sixteenth chair of the Federal Reserve since 2018.
What is Federal Reserve System?
The Fed or Federal Reserve System is the central banking system of the USA. It was created in 1913, on December 23, with the enactment of the Federal Reserve Act.