A quick note from the road again this morning before I get back to “home base” later on today…

First, the consensus was correct: the Fed held off hiking rights again. However, Fire Marshall Jay and his comrades now suggest two more 25-bp rate hikes over the balance of 2023; this outcome was even more of a “hawkish skip” than had been expected.

Wolf Richter RIGHT HERE gives a great post-Fed analysis of this and further reminds us HERE that the central bank is at the very least likely to hold rates at their present level for many months until forced to do otherwise. This would be the case if corporate earnings and economic stats begin to deteriorate far more notably in the months ahead; and that remains up in the air.

As the “Higher for Longer” regimen becomes that much more entrenched and a lot of the Pollyannas start to finally get it through their heads, we’ll finally start to see exuberant asset markets reprice things, I.M.O.

For good measure just minutes ago, it was reported that the European Central Bank took its own key rate up to 3.5%, its highest since 2001. As the initial headline in the The Financial Times reads,

“The European Central Bank has raised interest rates to their highest level in 22 years, warning that inflation is far from vanquished. The ECB’s decision to raise its benchmark deposit rate by a quarter-point to 3.5 per cent comes as it grapples with both an apparent wage-price spiral and a stagnant economy.” (Emphasis added.)

It remains my own expectation/base case that such a more intractable stagflation is in our future in the U.S. of A. as well.

The broad stock market–though, yes, joined somewhat of late in a more positive way by small caps–is WAY out over its skis. I think the best that even the bulls can hope for after yesterday is that a necessary correction of the uber-bullishness and overbought nature of the Nasdaq especially is that a pull back establishes the recent breakout level above the double-top around 12,200 as support.

With the Fed having “acted” now, we’re most likely to get a part-sell on the news and part-correction, as interest rates at the long end move at least modestly higher now too.

So all of our inverse ETFs are back to a BUY. Top them up to my recommended allocations as needed; I’m mulling over getting even heavier into a couple of them.

Finally, yesterday morning’s email was intended to have several other company comments as you saw in the subject line. But for whatever reasons, Constant Contact had gremlins galore at work! After I’d realized I wasn’t going to be getting any farther than I did I attempted twice to change the subject line and thought I had. Oh, well.

BUT rest assured those updates on RR, USHA, VMAR and SKYE are on their way (and others!)

All the best,

Chris Temple — Editor/Publisher