Powell and the Playoff
December 04, 2023
13-0 FSU gets bounced?!?!
In a week that felt like a college football playoff game, Federal Reserve Chair Jerome Powell took to the field to address the economy, complete with cheers, jeers, and a touch of playoff humor. Powell acknowledged the slowdown in inflation as if he had just scored a touchdown, proudly stating, “The forcefulness of our response to inflation helped maintain the Fed’s hard-won credibility.” It’s almost as if he wanted to raise a championship trophy for keeping inflation expectations “well anchored.” Transitory?
But are we out of the game just yet? Like my wife’s alma mater, Florida State. Only two TVs and a coffee table were broken when they announced the top four yesterday. Success!! Powell left the door open for more tightening, attempting to play mind games with the markets. It’s like a football coach saying, “We might have won this round, but don’t count us out for the next season!”
The Fed’s favorite player, the Personal Consumption Expenditures (PCE), showed a flat performance in October, with inflation behaving like a team struggling to find its rhythm. The housing component scored a touchdown, rising 0.43% last month, but fans wonder if it can keep up the momentum to help drop inflation to target.
Meanwhile, the economic players were making moves. CoreLogic reported a slight worsening in loan performance, teasing us with a potential canary in the coal mine. Initial Jobless Claims played a Thanksgiving Day Holiday trick, rising by 7,000, but the real shocker came from continuing claims, signaling a weakening labor market facing a tough opponent.
In the real estate arena, the Case Shiller Home Price National Index showed home prices rising like a team on a winning streak. All 20 cities saw gains, setting the stage for a potential championship in home price appreciation. This should be national Championship-type news when paired with the possibility that we apexed rates around 8% but still have gains in appreciation. Along with a boatload of equity for most as well! Shout it off the rooftops!
As we await the next economic kickoff, it’s clear that Powell and the Fed are playing a strategic game. Will they make it to the economic playoffs, or will we see a recession curveball? Only time will tell, and in the meantime, let’s enjoy the game with a dash of humor and a sprinkle of uncertainty. After all, in the world of economics, every play is a potential game-changer.
Although my alma mater, Michigan State University, finished with fewer wins than it requires to be “bowl eligible,” I must still leave you with…Go Green!!!