Craig Hemke, Founder of TF Metals Report, joins us to discuss the bounce in most markets the last 2 days, after the FOMC press conference and GDP numbers were released. We start off by reviewing what the forward-looking market participants viewed as the first sign of a “Powel Pivot” when Jerome Powell indicated that the Fed was shifting from fighting inflation at all costs, to being data dependent and considering their rates close to normalized. That is a big departure from the peak hawkishness we saw after the June meeting, so the markets responded in kind. Craig outlines that is very similar to the same pattern we saw play out in late 2018 where most of Wall Street was prepared for a much more hawkish Fed for a longer period of time, and then that plan fizzled and the central bank went back to rate cuts to appease the markets.
Next we review the environment of stagflation that we’ve been in with stagnant growth, high inflation, high energy prices, and a weakening health of many labor metrics, despite the picture some took away from the recent strong jobs number. With a 2nd quarter of negative GDP growth, we ask Craig if this means we are in a recession, and if it even matters. What is key moving forward is how the Fed will react to their choice regarding fighting inflation versus buoying the economic weakness.