Authored by Richard Breslow, a former FX trader and fund manager who writes for Bloomberg
The Minutes Are Dead, Long Live the Speeches
The FOMC minutes came and went with a thud. You could feel the energy level evaporate from a market hoping for the Fed to signal that its actions might bear some resemblance to their speech-making. Still, there has been no shortage of analysts saying the missive reflected whatever it was they wanted to hear.
Fed communication that changes no one’s minds, regardless of where they are on the rate-hike spectrum and succeeds only in wiping out day traders’ positions falls short of meaningful guidance. We already knew that if everything falls perfectly into line they might consider doing something.
But if we’re looking toward the next events that might push the needle forward – for the markets, even if not the Fed – there are four speaking events on the near-term docket worth noting. This morning, newly installed U.S. Treasury Secretary Mnuchin will be making the media rounds, starting with CNBC. President Trump will be delivering on Tuesday what will effectively be his State-of-the-Union address. And next Friday, we’ll get speeches by both Vice Chairman Fischer and Chair Yellen.
Mnuchin isn’t campaigning for confirmation any longer, and it’s important he tries to establish himself as the lead spokesman on issues that should be within the purview of the secretary.
There are issues ranging from currencies, trade, taxes and deficits, to name a few, that markets feel entitled to be given greater clarity. Delphic comments about a strong dollar as long as it’s not too strong at the moment won’t help. And you can be sure the rest of the G-20 will want to learn more about currency manipulation and tariffs. It’s a big moment in demonstrating just how strong a start he will have in office.
Which President Trump shows up is anyone’s guess. Anyone who tries to convince you that the run-up in equities is justified on a forward looking P/E basis and wasn’t necessarily based on hoped for fiscal easing is trying to sell you something.
If March is to have any hope of being “in play” in anything but fantasy only, then it’s up to Yellen and Fischer to make the case. No regional president is going to do it. And if they really have caveats that take it off the table, wouldn’t it be refreshing to know what they actually are. Don’t hold your breath.