The full statement from the FOMC September 2020 meeting
The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.
The COVID-19 pandemic is causing tremendous human and economic hardship across the United States and around the world. Economic activity and employment have picked up in recent months but remain well below their levels at the beginning of the year. Weaker demand and significantly lower oil prices are holding down consumer price inflation. Overall financial conditions have improved in recent months, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.
The path of the economy will depend significantly on the course of the virus. The ongoing public health crisis will continue to weigh on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, over coming months the Federal Reserve will increase its holdings of Treasury securities and agency mortgage-backed securities at least at the current pace to sustain smooth market functioning and help foster accommodative financial conditions, thereby supporting the flow of credit to households and businesses. (more…)
1.) Learn to be wrong. Traditional education trains us into thinking that we have to be right to get the grade. With investing and trading, focusing on being right will bring assymetric risk to your methodology and will eventually lead to a blowout at least once. – Steven Place
2.) First, invest in yourself. That is, acquire as much knowledge as possible and analytical skills in a wide variety of disciplines and develop the ability to abstract yourself from the present. Become a mathematician, economist, political scientist, psychologist, sociologist, and futurist. – Gary Evans
3.) You are not a market-timing genius and neither is anyone selling services to you! There is a long-term path to progress, with several good ways to get aboard. Be interested, be watchful, but do not be too confident. – Jeff Miller
4.) First, understand that ultimately you are responsible for the outcome of your investments and that they shouldn’t blame bad markets, bad advisors, or bad luck if they lose money. Secondly, always try to stay as objective and unemotional as you can about what you invest in. And lastly, remember that discipline and risk management is the key. You can lose all the profits from five well managed trades or investments with one poorly managed one.
“…extreme brevity of the financial memory. In consequence, financial disaster is quickly forgotten. In further consequence, when the same or closely similar circumstances occur again, SOMETIMES IN A FEW YEARS, they are hailed by a new, often youthful, and always extremely self-confident generation as a brilliantly innovative discovery in the financial and larger economic world. There can be few fields of human endeavor in which history counts for so little as in the world of finance.” [emphasis mine].
BOJ governor, Haruhiko Kuroda, begins his press conference
- But Japanese economy remains in an extremely severe siituation
- Pace of recovery to only be moderate
- Inflation is likely to be negative for the time being
- Future economic developments remain extremely unclear
- Risks are tilted to the downside for prices, economic growth
- BOJ won’t hesitate to ease further if needed
- Will continue to support corporate financing, markets
Kuroda is still maintaining a more subdued take on the economic situation but that is hardly a surprise. The recent economic data from Japan have been rather poor and a possible virus resurgence only adds to more risks surrounding the outlook.
But Kuroda stands firm in assuring that the BOJ policies since March are having an impact, though I’m sure they pretty much lucked out on this one with the Fed and ECB doing most of the heavy lifting to appease financial risks in the market for the most part.
Japanese economic growth in the January to March quarter of 2020 – this the preliminary release
GDP -0.9% sa q/q
- expected -1.1%, prior -1.8%
GDP -3.4% annualised sa q/q
- expected -4.5%, prior -7.1%
GDP -0.8% nominal q/q
- expected -1.3%, prior -1.5%
GDP deflator (an inflation indication) %
- expected 0.7%, prior 1.2%
Private consumption -0.7%
- expected -1.6% q/q, prior -2.8%
Business spending -0.5% (capex)
- expected -1.5%, prior -4.6%
- 2 consecutive quarters of contraction for the Japanese economy, the economy moves into recession for the first time since H2 of 2015
- Q1 exports had their biggest drop q/q since the 2nd quarter of 2011, down 6%
January and February were stable to slowly picking up for Japan but the outbreak in March hit economic growth. The April to June quarter is likely to be even worse, with a more prolonged impact. Restrictions were imposed by the April 7 national emergency declaration shutting many restaurants, large retail outlets, hotels and more. The restrictions were partially lifted on May 14, but are still in place for Tokyo and Osaka, the two largest cities in Japan.
Yen doing little.
Japan Industrial Production for March (preliminary)
-3.7 % m/m
- expected -5.0%, prior -0.3%
-5.2 % y/y
- expected -7.4%, prior -5.7%
Manufacturers see April output +1.4% m/m and May output -1.4% m/m
Initial jobless claims top the economic calendar
The weekly initial jobless claims report at the bottom of the hour is for the week ending March 14 so it’s before the real coronavirus crunch, which is a week or two away.
Last week was 211K and the ‘consensus’ this week is 220K but that’s far lower than what the market is expecting. State unemployment claims in some places are up 5x to 10x.
Where are you guys coming up with this stuff… I was out last night eating and food places are full stores are full… you are acting like this is the end of the world…this is being blow up to be way way more that what it is… which is nothing more than a cold with a twist on it that has not even gone above last year flu session. This is completely stupid what the news media is doing.
Now it’s conventional wisdom.
What we haven’t figured out is if the bureaucracy can handle and process the level of claims to actually get people the money. That’s more important right now than a $1 trillion piece of legislation the White House is proposing to get people money at the end of April.
Ifo institute with their latest survey among 3,400 German firms
- 56% are suffering from negative effects from the virus outbreak
- 63% of manufacturing and trade companies said they were negatively affected
- Problems from postponement of business trips, supply chain issues, lower demand
- 96% of firms in the tourism sector, 79% in hospitality sector said they were affected
It is but a small sample size and I would argue that the negative implications don’t just apply to one particular country. It is pretty much the same all across the globe and the impact is much worse on countries like Italy, Japan and South Korea.