Yahoo Finance Some of Wall Street's top commentators fear a recession is at hand as rates set to go higher for longer
Good morning. I'm Phil Rosen, writing to you just blocks away from the Federal Reserve building in Manhattan.
Yesterday on Capitol Hill, Jerome Powell reiterated his warning that the Fed's more than ready to keep jacking up rates if necessary.
Inflation hasn't gone away as easily as policymakers want, and Powell thinks that may just warrant a steeper policy path.
He did make clear, however, that nothing yet is set in stone (traders have doubled the expected odds of a half-point hike at this month's meeting).
"I stress that no decision has been made on this," Powell said.
Let's see what some top commentators are saying.
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1. Markets are feeling anxious about that Powell testimony. Depending on whose commentary you're reading, Powell's chat with lawmakers this week was either in line with expectations or represents a significant shift in the narrative, from "we've got this" to "buckle up."
A move back to 50 basis points at the upcoming Fed meeting, from a 25 basis-point increase last month, would be the first time the central bank has stumbled at the end of a rate hike cycle in about 30 years, and a possible acknowledgment of a policy error.
"The Fed is creeping its way forward through a dense data fog, and this suggests to me that it should avoid drastic moves in either direction," Nobel economist Paul Krugman said in an op-ed this week ahead of the Powell testimony.
That's not the most reassuring assessment of the situation as some of the biggest commentators in markets are saying a recession is right around the corner.
To Citadel chief Ken Griffin — who last year pocketed $4.1 billion in earnings after his hedge fund's record year — a downturn is looming.
Household savings are shriveling and surging interest rates are choking growth, he told Bloomberg on Wednesday.
Consumers had saved up a large chunk of cash during the pandemic, but the subsequent excess spending has spurred higher inflation and put pressure on the Fed to tighten policy.
"We have the setup for a recession unfolding," the billionaire investor said.
He called for the Fed to be more clear and consistent with its messaging, and to stifle any hopes of easing policy.
"Every time they take the foot off the brake — or the market perceives they're taking their foot off the brake — and the job's not done, they make their work even harder," Griffin said.
Meanwhile, "Bond King," Jeffrey Gundlach is expecting the Fed to have to push on with more jumbo rate hikes because the economy is showing too many signs of strength.
The only thing that could stop a bigger move is weakening of labor-market data, he explained.
"The only way that won't happen is if the employment data and the unemployment rate...surprises to the downside," Gundlach said. "That has not been the pattern recently. If it comes in at or above expectations, I think it's a lock that the Fed's going to go with 50 basis points at a minimum."
What's your recession outlook for the next six months? Tweet me (@philrosenn) or email me (prosen@insider.com) to let me know.
In other news:
2. US stock futures fall early Thursday, as investors pick over Powell's latest comments and get ready for the jobless claims report due before the bell. Meanwhile, Silvergate shares are sinking after the key bank for crypto firms said it will shut down. Here are the latest market moves.
3. Earnings on deck: Oracle, Applied Materials, and JD.com, all reporting.
4. A top investment chief shared the approach behind "The Big Short" garage band hedge fund that flipped $110,000 to over $80 million. The exec also broke down how to use the strategy in today's stock market to make extremely cheap bets that garner "through the roof" returns.
5. Binance continues to get more popular with Sam Bankman-Fried's FTX out of the picture. In February, the world's largest crypto exchange saw its market share grow from 59% to 61.8%, marking the fourth consecutive month of increases. Those gains come as the company falls under increasing regulatory scrutiny.
6. The rally in stocks won't be swayed by a hawkish Jerome Powell, according to Fundstrat. Market volatility will ease as inflation continues to fall, head of research Tom Lee wrote in a note to clients Wednesday. "This testimony is not really changing anything as the Fed's actual path is a function of what happens with inflation."
7. Housing market sentiment is nearing all-time lows. Fannie Mae's Home Purchasing Sentiment Index dropped this week while mortgage rates moved higher. Here's what you want to know.
8. Bank of America shared four reasons why artificial intelligence is on the brink of an "iPhone moment." The firm forecasted that the nascent space could have a $15.7 trillion impact on the global economy within seven years — and enrich investors in these 13 sectors along the way.
9. Adam Taggert's financial advice YouTube channel attracts millions of viewers every month. "People are so hungry for nutritious financial content," he said. The creator shared why he's had such steep and fast success — and what comes next for the budding brand.
10. Warren Buffett's Berkshire Hathaway bought another $355 million of Occidental stock. The conglomerate resumed its buying of the energy company after a five-month break. After a three-day spending spree, Berkshire now holds a 22.2% stake in Occidental.
Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email prosen@insider.com.
Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.
Read the original article on Business Insider
