This Isn’t Novel
In his debut, Warsh illustrated that the Fed will pivot toward a “less is more” communication style. There has been no shortage of opinions, but I want to make a specific point clear to new investors who may find themselves overwhelmed by the noise:
This isn’t novel.
Greenspan spoke in riddles and left Wall Street to parse his briefcase for clues. Powell held the market’s hand with dot plots and forward guidance. Warsh lands somewhere in between. The Federal Reserve adapts with the times to better suit them.
Nothing with Warsh changes the math.
This is not a reason to change your portfolio or your outlook.
Much of Warsh’s reformist agenda fits the moment. Warsh isn’t a wildcard. His stances are well documented. In fact, I believe his approach to Fed communication will prove beneficial. That said, until the market adjusts to this new style, expect heightened volatility surrounding FOMCs, unlike what we’ve experienced in Powell’s final years.
If you are inclined to hear more, you’ll be happy to spend 15 minutes listening to Don Lett (Stock Chartistry); I spent 15 minutes on the topic in the most recent episode of Charts and Checks.
Risk to Fed Independence has Peaked
One final point worth noting: Powell successfully defended the Fed’s independence. Consequently, Trump’s influence over Warsh peaked the day Warsh was sworn in. When Trump inevitably takes a shot at Warsh for holding rates in the future — albeit, Trump was able to restrain himself last week — Warsh will be in a position to weather it. In short, although questions surrounding Fed independence may not be permanently put to rest, most objective observers will agree that the threat has peaked.
Key
Macro Economic Events
Corporate Earnings
High Importance
See Note Section Below For Additional Insight
Monday
None Scheduled
Tuesday
US Flash Manufacturing PMI (Jun.) | Est. 54.8; Prior 55.3 | 09:45
US Flash Services PMI (Jun.) | Est. 51; Prior 50.9 | 09:45
Cerebras (CBRS) | ATC – this IPO was left-for-dead out the gate. To close out last week, it jumped +9% in a single day. Let’s see if their quarter will produce some follow-through, leveraging the better backdrop SpaceX has provided for IPOs and Apple has for chips.
FedEx (FDX) | ATC – transports have been on fire. Check out the Dow Transportation Index. Volumes are high; no sign of recession. With oil having peaked – in my humble opinion – the largest threat to their guidance has been knee-capped.
Wednesday
Paychex (PAYX) | BTO – although the stock has sucked, their quarter provides a look into small-to-medium-sized business confidence.
Jefferies (JEF) | ATC – Morgan Stanley (MS) and Goldman Sachs (GS) get all the love in IB. Well, JEF stock looks pretty good too. Worth taking a look if you feel as though you missed out on the big 2 in IB… which you wouldn’t have if you follow my work, but that’s not my business.
Micron (MU) | ATC – Apple deciding to raise costs of the iPhone due to a memory shortage was another feather in the cap of the long-memory thesis. If Apple – one of the most influential buyers on the planet – cannot secure memory at a reasonable price, then we aren’t close to a top in memory prices. I wouldn’t get ahead of the quarter, but perhaps any small flaw will be used as an excuse to sell, creating a buyable dip for a trade.
Thursday
Weekly Jobless Claims (Jun. 20) | Est. 225K; Prior 226K | 08:30
Personal Income, M/M% (May) | Est. 0.4%; Prior 0% | 08:30
Consumer Spending, M/M% (May) | Est. 0.5%; Prior 0.5% | 08:30
May Personal Consumption Expenditures
PCE Price Idx, M/M% | Est. 0.5%; Prior 0.4%
PCE Price Idx, Y/Y% | Est. 4.1%; Prior 3.8%
PCE Core Price Idx, M/M% | Est. 0.3%; Prior 0.2%
PCE Core Price Idx, Y/Y% | Est. 3.4%; Prior 3.3%
Friday
UMich Final Consumer Survey (Jun.) | Est. 48.9; Prior 44.8 | 10:00
Gorilla With Glasses 