The Federal Reserve is About to Have an Extremely Awkward Meeting
Weekly Investment Update | By Brian Schreiner
Stocks, bonds, commodities, gold and bitcoin were all higher last week despite concerning inflation data, deteriorating conditions in the labor market and waning consumer sentiment.
Inflation Accelerates
Thursday’s Consumer Price Index reading showed that U.S. inflation rose at a 2.9% annual rate in August, up from 2.7% in July. Personal Consumption Expenditures (PCE), which exclude food and energy costs climbed to a 3.1% annual rate.
Labor Market Conditions Weakening
The government said last week that nonfarm payrolls could have been overstated by 911,000 jobs in the 12 months through March. That followed data which showed that job growth almost stalled in August and the economy shed jobs in June for the first time in four and a half years. "Even if the increase in initial claims overstates any renewed weakness in the labor market, claims have been drifting higher," said Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
Consumer Sentiment Slips to Four-Month Low
U.S. consumer sentiment slipped to the lowest level in four months, based on Friday’s preliminary monthly report from a University of Michigan survey. The decrease from a late August index reading of 58.2 to September’s preliminary figure of 55.4 marked the second monthly decline in a row. “Economic sentiment declined more than expected in September largely because Americans are fearful of losing their jobs,” said Heather Long, chief economist at Navy Federal Credit Union.
Asset Prices Rise
The S&P 500 finished the week near its all-time high, up 1.6% on the week and 18% over the past year. Bonds, measured by the U.S. Aggregate Bond ETF (ticker: AGG), were up 0.4% last week and up 2.7% over the last 12 months. Commodities, as measured by the Commodity Index Tracking Fund (ticker: DBC) were up 1.5% last week and up 9% over the last year. The price of gold climbed for the fourth consecutive week closing near an all time high at $3,646 per ounce. Gold is up 39% over the past 12 months. Bitcoin is trading above $115,000, up 91% over the last year.
The Awkward Fed Meeting
After nine months of holding its key interest rate steady, the Federal Reserve is widely expected to announce a rate cut on Wednesday. President Trump has been browbeating Fed Chair Jerome Powell to lower interest rates. The presence of two controversial figures on the Board of Governors and a rash of concerning economic data will make this meeting an awkward one. The Fed is usually able to establish consensus among Committee Members, but this meeting is setting up to be an oddball.
Stephen Miran, who appears to be on track to be confirmed as a Fed governor before the meeting, has been critical of the Fed's consensus-driven approach and his decision to remain a White House economic adviser has raised concerns about his independence, leading to predictions of more dissenting votes. Meanwhile, Governor Lisa Cook is currently suing President Trump and the Fed's board of governors to prevent her dismissal, creating a tense situation where she may be discussing monetary policy with individuals she is actively in a legal battle with. Get your popcorn ready. α
Interesting things I came across this week…
BlackRock Weighs ETF Tokenization (COINTELEGRAPH)
DEA Arrests Hundreds of Sinaloa Cartel Members; Seizes 10,000 kg Drugs and 420 firearms (DEA)
British Comedy Writer Arrested for Gender-Critical Tweets (ZeroHedge)
The Mafia is Killing Italian Football (Search Party)
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