VIDEO: Powell Quickly Removes the Rate-Cut Punch Bowl

In today’s Daily Rundown video, Chris Versace discusses comments from Fed Chair Jerome Powell today that, as we suspected would be the case, threw cold water on the market’s increased expectation for rate cuts this year. Powell admitted tariffs were larger than expected and it will take time and data to determine their full impact on the economy and monetary policy. 

As Powell’s comments weigh on the market, Chris explains what we’re watching next and how we’ll use the weekend to hit the ground running subject to weekend developments. That includes a quick discussion on inelastic companies and sharing an example of what we’ll be looking for and why.

Transcript

CHRIS VERSACE: Hey folks, Chris Versace here. As we close out a week that has been, as you know, rather challenging and it's looking like it's going to end the week on a rough note. Why? Well, the market is reacting to signs of escalating tariffs and uncertainty that is only moving higher, but also too, as we move into the afternoon, as we suspected could be the case, Fed Chair Powell shared that the Fed is not poised to deliver rate cuts as soon as the market was hoping it would.

During Powell's appearance around 11:30 or so this morning, he did touch on a number of factors that we already discussed, including the strength found in today's March Employment Report. But he also conceded that progress to the Fed's 2% inflation target has slowed. Powell also noted that tariffs are likely to raise inflation in coming quarters, and it will take time and data to determine the extent of tariffs impact. Part of that being, as Powell noted, the duration of what he called higher than expected tariff increases.

Bottom line, folks, is that while the Fed will remain data dependent, as will we, Powell signaled the Fed is not close to delivering the rate cuts the market is hoping for. Now, if you've read our Alerts between yesterday and today, you know that Powell's comments lined up with pretty much what we expected to hear. And as a result, we are not surprised that the market is having to once again rethink the potential rate of Fed rate cuts for 2025.

And yes, that is bringing another wave of pressure on the market. So we're going to continue to stick with our plan. And that means continuing to keep our eyes on the market oscillators, RSI levels for the S&P 500 and NASDAQ composite. But we're also going to recognize that there is ample uncertainty still in the market, especially as we move into the weekend.

We touched on this in one of our Alerts today. You know, a lot can happen over the weekend, both good and not so good. You know, potentially could there be more Trump tariff retaliation? Maybe from the euro zone, possible. Could we see President Trump respond to China's retaliatory tariffs that were announced this morning and escalate trade tensions even further? Possible.

Could we get some weekend developments on earnings preannouncements that we've been talking about? Possible as well, maybe early next week. Remember that while we've seen the S&P 500, the NASDAQ composite and the other market indicators kind of respond being under pressure, given the developments of the last couple of days, we haven't seen that translate yet into revised earnings expectations for the S&P 500, the market barometer. That will likely come become in the coming days.

So that is another shoe, as we like to say, that we have to watch, see how it drops, and kind of plot our moves from there. So the bottom line is that as we move into the weekend, there are going to be a number of things on our radar screens that we will want to have occur and get, as we like to say, baked into the market. I said it yesterday, but I will say it again, because I know a lot of folks are thinking this, they're feeling this.

It's very trying, extremely frustrating, nerve-wracking. Trust me, I know. I am right there with you. But as we have seen time and time again, emotional responses in the market are not constructive.

So let's do our best to keep our wits about us and plot our moves for when the time is right. And I don't often quote Fed Chair Powell directly, but today he said something that I think is particularly timely. Take a step back, let things clarify so we can have a greater confidence in the moves that we do make.

That's the position that we're in. That's the position we want to be in with the portfolio. And that's going to dictate our actions over the coming days.

Now, before we end today's video, I did want to spend a minute talking about inelastic companies. Some folks may or may not be familiar with the term inelastic, but generally speaking, these are companies that provide goods and services that are bought by consumers no matter what the state of the economy. And there are multiple types of inelastic goods out there.

A lot of folks tend to think about utilities, water, electrical. But in today's increasingly digital, increasingly connected world, that means wireless services. I'll give you a quick sidebar story about when I was teaching undergraduate and graduate finance classes.

I asked my students if you had to forgo a meal or two each week to continue to have enough money to pay for your wireless subscription, would you do it? Nearly everybody's hand went up. That tells you how important, how inelastic wireless services are, especially in today's connected world even before we contemplate about how we use these devices, whether it's to communicate, pay bills, stay informed, what have you. So this has us taking a look at AT&T, Verizon, T-Mobile and some others out there.

And here's the deal. While some of them are similar in nature, they're not all the same. They have varying degrees of exposure to wireless services. Some have broadband, some have other businesses. So from our perspective, we want to zero in on those that are especially weighted heavily towards wireless services.

Now, what does that mean? It means wireless has a large percentage of their revenue and their profits, not necessarily the company that might have the largest wireless business in the country in the industry. Kind of a fine point, but it's an important one. So that's one of the things we'll be working on over the weekend. And there will be some others as well, so that come Monday, if need be, we can hit the ground running.

Coming up later today, just on a programming note, we will have our weekly roundup and it will contain an updated look at RSI levels for the portfolio, as well as a discussion on market oscillators. Trust me when I say this is one weekly roundup that you won't want to miss. And with that in mind, let me get back to it and I will say to you, have a wonderful weekend and we'll see you back here on Monday to kick the week off. Thanks for watching.