Federal Reserve Chairman Jerome Powell may have missed the boat.
“The risk is that because of the multiplicity of shocks you start to transition to a higher inflation regime,” he said to a European Central Bank Forum. “Our job is literally to prevent that from happening, and we will prevent that from happening.”
The definitive claim that he will prevent this from happening should be received with some skepticism. The Fed has previously said that some of the factors that are increasing inflation are out of its control.
When you say you will do something, that means you are going to use all the tools at your disposal – even at the risk of making the overall situation worse.
To his credit, Chairman Powell admits the risk.
“We’re strongly committed to using our tools to get inflation to come down,” he said. “The way to do that is to slow down growth, ideally keeping it positive. Is there a risk that [attempts to control inflation] would go too far? Certainly, there’s a risk.”
Powell simply said that the “bigger mistake” would be to “fail to restore price stability.”
Yet what happens if the Fed uses all of its “tools” and still fails to restore price stability? Well, in that case, brace for impact.
In my view, the Fed was too slow in responding to inflation. As a result, the situation we face now is far worse than it had to be. And I’m not reassured by claims that the Fed is willing to deliberately stymie growth to control prices.
Investors should start looking at sectors that are outside the Fed’s control. Biotech and commodities are two possible sectors for new investment, as the former is still heavily reliant on clinical trial results and the latter may depend heavily on the battlefield situation in Ukraine.
What I wouldn’t do is trust the Fed. Instead, trust the numbers and your trading approach… and don’t ever be afraid to reach out.
Remember, you have a whole team at your back.
Keep Moving,
In this week’s Hood Talk, Chris looks at the market through three time frames – the daily, monthly, and weekly charts.
This isn’t just guesswork, but an analysis using tools that hedge funds are willing to pay millions of dollars to use.
WORD ON THE STREET
The Pandemic’s Permanent Change
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Powell Says There Is No Going Back – While Federal Reserve Chairman Jerome Powell assured investors that the central bank would do whatever it takes to control inflation, we may be dealing with a different beast altogether when it comes to the economy. “The economy is being driven by very different forces,” he said. “What we don’t know is whether we’ll be going back to something that looks like, or a little bit like, what we had before [the pandemic].” Of course, investors might be forgiven for wondering if the same old tools will work to control inflation in this new economy.
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VP Harris Betrays Biden? – President Joe Biden is plummeting in the polls and Vice President Kamala Harris may be keeping the door open for a run of her own. “The president intends to run and if he does, I will be his ticket mate,” she said. “We will run together.” There’s only one word that’s worth registering in that statement – IF.
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China Profits From Cheap Coal – Sometimes the best way to win is not to play. While Russia and the West are destroying each other’s economies, China is profiting from cheap energy. Russia is selling coal to the People’s Republic at deep discounts. Russia’s seaborne coal supplies to China increased by 20% year-over-year in May.
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Are We Still Going Through With This Bitcoin Thing? – Bitcoin isn’t exactly the hottest investment right now. Nontheless, Grayscale Investments is suing the SEC after the regulatory agency vetoed its bid for a bitcoin ETF. It would have been the first bitcoin ETF, but the SEC has been forcefully arguing in recent months for more regulation of cryptocurrency. Grayscale called the SEC’s decision “arbitrary and capricious.”
HOT SPOTS: What’s Going on in Geopolitics
- BoJo Says Putin Invasion Caused By “Toxic Masculinity”: Conservative Prime Minister Boris Johnson had an interesting theory about why Russia invaded Ukraine. “If Putin was a woman, which he obviously isn’t,” Johnson said helpfully, “but if he were, I really don’t think he would’ve embarked on a crazy, macho war of invasion and violence the way that he is.” Johnson went on to call the invasion “a perfect example of toxic masculinity.” Catherine the Great was not available for comment.
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Russia Calls NATO Expansion “Destabilizing” – Russian president Vladimir Putin brushed off Swedish and Finnish membership in NATO, saying that “we don’t have the problems that we have with Ukraine… they want to join NATO, go ahead.” However, he said that if NATO stations military equipment in the region, “we will have to respond in kind.”
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UK Providing More Weapons To Ukraine – The United Kingdom is providing more weapons to Ukraine to aid what Boris Johnson called the country’s “valiant defense.” However, what Russia might really be examining is the UK’s declaration that the new aid will help Ukraine begin “mounting offensive operations.
CUTTING EDGE: What‘s Happening In Tech
- Fauci Reeling After Pfizer Side Effects – Dr. Anthony Fauci tested positive again for COVID-19 after first getting the disease two weeks ago. He is reportedly suffering the “Paxlovid rebound,” when COVID-19 returns to testable levels after treatment with Pfizer’s Paxlovid. However, it’s unclear whether this has anything to do with the drug or is simply part of the natural course of the disease.
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New Omicron Wave Crushing NYC – The BA.5 subvariant of COVID-19, considered by some experts to be the “worst” version of Omicron, is now spreading quickly in New York City. The Big Apple’s rolling seven-day average for positive results on COVID-19 tests is just below 10%. That’s the highest level since late January.
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Three Arrows Capital Liquidating – After a ruling from a British Virgin Islands court, Three Arrows Capital may be no more. It won’t just end with one firm going bust… many lending platforms may suffer from the liquidation. It’s questionable whether many crypto exchanges have sufficient banking to pay creditors… meaning this could be just the beginning for the sector.
FOR YOUR CONSIDERATION
“A biotech stock lives or dies by clinical test results.”
Nervous about the rhetoric coming from the Fed? Good, that means you are still sane. But even with crypto crumbling and worries about growth stocks, that doesn’t mean there aren’t major opportunities.
Mr. X breaks down some of the stocks that have surged in recent days… and highlights three other biotech companies that might have a place in your portfolio. But remember… it ultimately comes down to what the FDA decides to approve.
Before taking action, read this and find out everything you can.
The information in this email is intended for informational purposes only and does not guarantee specific results as there is a high degree of risk involved with trading. Also, our traders are real traders and may have financial interests in the companies discussed. Please see our Terms and Conditions for more information