Morning Report: Jerome Powell gets more hawkish

Vital Statistics:

 LastChange
S&P futures4,46716.2
Oil (WTI)112.824.39
10 year government bond yield 2.36%
30 year fixed rate mortgage 4.60%

Stocks are higher this morning after Fed Chairman Jerome Powell said the Fed was prepared to move in half point increments to beat inflation. Bonds and MBS are down.

Goldman is out with a call saying that the Fed will raise the Fed Funds rate by 50 basis points at both the May and June meetings. They are basing this on the change in language from Powell last night, where he said the Fed must move “expeditiously” and “more aggressively” to prevent an upward spiral from occurring. Overall, Goldman is forecasting 50 bps in May and June, and then 25 bps at every meeting for the rest of 2022 and the first 3 meetings in 2023.

It is interesting to see stocks rallying on Powell’s comments. The general playbook is that stocks generally struggle when the Fed is tightening. At a panel last night, Powell said: “If we think it’s appropriate to raise [by a half point] at a meeting or meetings, we will do so,” Mr. Powell said during a moderated discussion after a speech on Monday before the National Association for Business Economics in Washington, D.C. He acknowledged that inflation is no longer “transitory:” “That story has already fallen apart,” Mr. Powell said Monday. “To the extent it continues to fall apart, my colleagues and I may well reach the conclusion we’ll need to move more quickly. And if so, we’ll do so.”

If the Fed follows Goldman’s forecast, the Fed Funds rate will be be in a range of 2.25% – 2.5% by the end of the year. This is more or less where rates were in 2019 before the pandemic. The bond market bottomed in late 1980, when the Fed Funds rate topped out at 22%. While stock bull markets generally last a few years, and bear markets last under a year, bond market cycles are long.

The number of loans in forbearance slipped by 12 basis points to 1.18% of servicer’s portfolios in February. “There were many positive results in overall mortgage performance in February,” said Marina Walsh, CMB, MBA Vice President of Industry Analysis. “The percentage of borrowers in forbearance declined for the 21st consecutive month, and the percentage of borrowers current on their mortgage payments increased to almost 95 percent – 350 basis points higher than one year ago. Finally, the percentage of borrowers with existing loan workouts who were current on their mortgage payments improved for the first time since June 2021. These three results – the lower forbearance rates and higher performance rates for both total borrowers and borrowers in workouts – are especially favorable, given that there is typically a dip in mortgage performance in February because of the shortened number of days to make a payment.” 

30 Responses

  1. This is interesting.

    I’d also add Ukraine to that, but in reverse. Establishment Right thinks it’s scoring points on Biden while ignoring the base’s zero interest in it. Is it donor service or genuine disconnect?

    Also, not treating the SCOTUS nominee as Kavanaugh and ACB were treated is also alienating.

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    • I wonder if the R leadership really believes that the left didn’t cheat.

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      • I suspect they’re happy they did.

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      • I think their view matches what Barr stated, namely that any irregularities weren’t significant enough to affect the outcome.

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        • jnc:

          I think their view matches what Barr stated, namely that any irregularities weren’t significant enough to affect the outcome.

          Given that the entire election process in 2020 was quite openly “irregular” in many places (in particular, a massive loosening up of non in-person voting procedures) I wonder how anyone possibly thinks they could know that.

          I think it is impossible to know what effect the many extra-legal changes made to voting regulations and procedures actually had on the result. But I will say that, given how much the D’s are opposed to any efforts to tighten up the new and expanded procedures in order to lessen the possibility of any voting “irregularities”, I think it is safe to say what effect they think less secure elections will have.

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        • Agreed. The amount of people who claim k knowledge of what is literally unknowable these days defies explanation. I can see the argument that Barr says: look, there’s nothing that can be proved here and the endless uncertain searching to prove the unprovable will just be more destructive.

          Which I can buy. But nobody can say with certainty much of anything about the election. Too many moving parts, too much playing fast and loose, not nearly enough of an audit trail.

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  2. SCOTUS nominee Kentanji Brown Jackson is unable to define the word “woman”:

    https://www.dailywire.com/news/im-not-a-biologist-supreme-court-nominee-says-she-cant-define-the-word-woman

    I think Blackburn took the wrong approach to the question. She should have begun by pointing out that Jackson’s nomination has been proudly promoted as being the first for a black woman, and then asked her “Is that true, that you are the first black woman to be nominated to SCOTUS?” Once she answered that, she would have implicitly admitted to understanding the word “woman” to mean something specific. Then Blackburn could have asked her the follow-up, “So, when it is said that you are the first black woman to be nominated, what does the word “woman” mean?”

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    • I’d have taken the angle of what constitutes the definition for legal purposes?

      I.e. if a male gets a draft notice can he get out of it by just saying that he identifies as female that point? If not, what would be sufficient to no longer be subject to the draft?

      Same thing with racial categories. What objective criteria allow one to apply as a racial minority to college or for say set aside government contracts?

      Relatedly, are organizations like the NCAA allowed to have their own definitions of male and female, and does that raise any Title IX issues?

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      • I agree, great questions, except that by taking the legal angle, she could then have used the dodge that, since the issue could possibly come before the court, she can’t “pre-judge” it.

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        • I’d have teased it out starting with something along the lines of “The Supreme Court has previously upheld the constitutionality of only applying the draft to males. Do you consider that to be settled law the same way you describe Roe v Wade as settled law?” and proceeded from there.

          Make the dodge and the dishonesty obvious if you can’t overcome it.

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        • I would have simply quoted her opening remarks….

          I stand on the shoulders of many who have come before me, including Judge Constance Baker Motley, who was the first African American woman to be appointed to the federal bench and with whom I share a birthday.

          …and then asked her “What did you mean by the word “woman” when you said that?”

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        • The Federalist noticed the same thing that I did…and then some!

          KBJ Referenced Women 14 Times in First Two Days of Hearings

          https://thefederalist.com/2022/03/23/if-ketanji-brown-jackson-doesnt-know-what-a-woman-is-why-does-she-use-the-word-so-much/

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    • “SCOTUS nominee Kentanji Brown Jackson is unable to define the word “woman”:”

      I’d actually change this to “refuses to”.

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      • jnc:

        I’d actually change this to “refuses to”.

        I am sure you are correct, but that then makes her a liar, since she said that she “can’t” because she isn’t a biologist. I thought it was more generous to imply that she is a moron rather than proclaim that she is a liar.

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        • No, because every SCOTUS candidate after Bork has lied to some degree or another in these hearings, usually with the “I don’t have an an opinion” on whatever subject is being discussed.

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        • I know that Thomas claimed not to have an opinion on abortion, but usually the dodge is simply that they can’t talk about an issue that might come before them as a Justice. I’m not aware of anyone else that claimed not to have an opinion at all.

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        • Didn’t one of the liberals claim to have never had a thought about abortion in their life?

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        • Possibly, but I don’t remember it. I just remember Thomas saying that he never participated in any debates on the merits of Roe v Wade.

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        • This morning in the mind of Justice Thomas:

          The crazy ones were always the best lays…

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        • Click to access 21a477_1bo2.pdf

          While I probably would have concurred with the majority based on separation of powers, the freaking over-reach of the Navy offering a sham procedure for a religious exemption echoes history known to me, and I am very sympathetic to Alito’s position. I would have tried to split the difference and force the Navy to come up with a non-sham process, in the internal debate.

          My split the difference scenario would have prevailed in the 70s because the US Code’s due process for federal employees extended to enlisted personnel. I am unsure of whether that statute still is in effect or if so whether it has been limited in scope.

          One problem, of course, with ordering the Navy to institute actual rather than sham process, is the Navy probably would have ignored any “interference”, anyway.

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        • Mark:

          I would have tried to split the difference and force the Navy to come up with a non-sham process, in the internal debate.

          Whatever the correct ruling is, let’s not overlook the fact that it is Biden who has instituted this sham process, in pursuit of a political agenda that, if anything, is actually diminishing rather than enhancing the fighting effectiveness of the armed forces.

          But…no mean tweets. #priorities

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        • That one is going over my head.

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        • I think it’s a hit on Ginni Thomas, the implication being she’s crazy because she believes that illegal ballot harvesting and fraudulent votes cost Trump the election. The data we have now, coming out of GA, WI and AZ being pretty compelling.

          But, you know, it’s totally cool when Stacy Abrams claims she was robbed. And like you said, even $6 / gas and war with Russia is totally worth no mean tweets.

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        • Mark,

          Was this posted in response to McWing or as a stand-alone comment? I read the decision and didn’t see any mention of either Ginny Thomas or the data coming out of GA, WI and AZ, so I am confused.

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        • Stand alone, but prompted by the discussion within the case of GA, and to a lesser extent, WI and AZ.

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        • Mark:

          Stand alone, but prompted by the discussion within the case of GA, and to a lesser extent, WI and AZ.

          I must have missed that. I read the opinion and didn’t see anything about GA or the others, but maybe I wasn’t reading carefully. Can you tell me where it was?

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      • Doesn’t want to say “the definition is whatever progressives say it is this week” which I think is the real answer.

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    • This was funny too:

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