Back in the day, when we asked someone to “keep it on the QT,” we wanted them to keep a secret on the quiet tip.
Powell was "sucking [money] like from a vacuum cleaner…Here's a guy nobody ever heard of him before, and now I made him, and he wants to show how tough he is."
-President Trump on Jerome Powell
President Trump continued his onslaught against Federal Reserve Chairman Jerome “Jay” Powell in an interview with Maria Bartiromo on Fox Business Network. That vacuum cleaner started with $10.0 billion a month, but it soon swelled to $50.0 billion a month (see chart above).
Fed Balance Sheet | Securities | Total |
Sept 2008 | $479,726,000,000 | $905,253,000,000 |
Feb 2015 | $4,236,063,000,000 | $4,501,685,000,000 |
Sept 2017 | $4,240,344,000,000 | $4,445,661,000,000 |
June 2019 | $3,661,016,000,000 | $3,844,016,000,000 |
Market Jeered Too
The Fed balance sheet has been pared, but was it too much, too fast?
The president’s ire has only increased in recent days, as Powell is asked about this in each interview or speaking appearance. The media loves the “feud” storyline, but the acrimony cannot be healthy for the Fed.
While there is no doubt the Fed should be an independent agency, I think it should face greater scrutiny and accountability. By the way, what Trump is saying out loud or in tweets, is what the stock market said in December when Powell proudly hiked rates for the fourth time in 2019 while he reiterated his determination to take $50.0 billion out of the economy every month.
Dow Reaction (Louder than a Tweet)
- Dec 19, 2018 -352
- Dec 20, 2018 -464
- Dec 21, 2018 -414
- Dec 24, 2018 -653
Portfolio Approach
There were no changes to the model portfolio.
Communication Services | Consumer Discretionary | Consumer Staples |
1 | 4 | 1 |
Energy | Financials | Healthcare |
1 | 2 | 1 |
Industrial | Materials | Real Estate |
2 | 3 | 1 |
Technology | Utilities | Cash |
2 | 0 | 2 |
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Today’s Session
The markets are a bit mixed this morning. The Nasdaq and S&P 500 are positive, while the Dow is basically flat after being lower due to Boeing (BA). The FAA found a new problem with 737 Max. The International Air Transport followed up stating that U.S. regulators need to work in lockstep with international regulators, stating “aviation cannot function efficiently without this coordinated effort.” The regulators want Boeing to organize pilot training for all airlines and regulators worldwide, requesting “alignment on additional training requirements for Boeing 737 MAX flight crew.” This news took shares of BA down about 3%.
The Dow turned around on news that China’s Xi is set to give President Trump terms to settle the trade war when they meet at the G20. That helped boast the market. However, it appears that in those demands, Xi will insist that the U.S. lift its ban on the sale U.S. technology companies selling to Huawei. So stay tuned.
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