Equities Continue Rally Despite Best Efforts By The Fed

Equities continue rally in spite of the Fed. It wasn't all equal as some sectors lagged others.

Fed Chairman Powell struck a dovish tone a week ago by stating "if we need to do more" with regard to further rate hikes. Yet, on Thursday of this past week, Powell struck an entirely different tone by stating "we are not confident we have achieved such a stance" with regard to rate hikes and dealing with inflation. This is a bit nonsensical as gas prices, used cars, and commodities, represented by the broad GSCI were lower last month. It's expected that both CPI & PPI will be lower on both a month-over-month and year-over-year basis at their release later this week.

Credit Card Debt and Personal Savings are being bantered about lately as signs of a coming recession.

However, when we put those metrics into the context of personal disposable income, we can see that the picture is not so problematic. Credit Card Debt relative to Disposable Income shows consumers are not near the levels of pre-COVID and no where near the levels of 2000 and 2007 - preceding those respective recessions. In addition, Personal Savings, when taken as a whole is down, but relative to Disposable Income is still at a healthier level than both 2000 and 2007 - even higher year-over-year. The Fed recently revised their Q4 GDP projection up from +1.2% to +2.1% due mainly to higher projections for consumer spending. Similarly, both the Chicago Fed's National Financial Conditions Index and the St. Louis Fed's Financial Stress Index moved lower last week, indicating loose financial conditions. Positive news on inflation should help equities continue rallying as further rate hikes would appear less likely.

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