Hey There Income Hunter,

You may have seen that Atlanta Fed President Rafael Bostic ignited fears of a more aggressive stance on rate hikes last week.

During an interview with the Financial Times, Bostic said the Fed could get even more aggressive than the four rate hikes already built in … but on Monday he walked that back and maintained his call for three .25% hikes this year.

Bostic also added that the Fed is not fixed on a set policy progression and that the central bank should get a few rate moves in hand, then reduce the size of the balance sheet. 

It seems to me like the Fed wants to be told what to do.

Today, I’ll share the recent numbers that show the only thing really going on is that the economy is quickly softening. 

News Flash or the Fed

A rapidly flattening yield curve is not a positive sign for the economy … and that’s exactly what we have while the Fed continues to talk up the economy:

 

 

You see, the Fed is now under the guidance of the Biden administration because Congress is in gridlock until inflation comes down. 

 

The Dems are getting very antsy as each passing day gets them closer to the midterms, which at this point looks like a GOP landslide waiting to happen.

 

Now, I do get where the Fed is coming from. The only way to address what the Democrats need is to cause a meltdown in the markets and then let the Dems come to the rescue with a nice spending bill.

 

So a slow dose of rate hikes will not do anything for Biden since it takes six months for any stimulus to get through the system and boost growth. 

Real Income Is Trending Lower

Real income tells the story.

The chart below shows the real income downtrend, which will only get worse as corporate earnings begin trending lower in Q2 of this year.

Q2 is the quarter where things get, well, real. Inflation, and now lower asset prices, are tightening for the Fed …

By the time the Fed starts draining liquidity the economy will already be weakening. 

So, here is the important question: is the Fed’s new protocol to get inflation down at all costs? 

I believe the answer is yes … at least until stocks get down to levels that allow the Fed to reverse course.

S&P 500 Index ETF (Ticker: SPY)

SPY is in a good sell zone after a two-day rally. I set up a bear spread on Monday near the 450 resistance, which is the 50% retracement from the down trade.  

The market is in the beginnings of a Stage 4 bear market and the data will confirm that in the weeks ahead. 

Here is the chart pattern for SPY …

Bring It Home

Another thing to pay attention to is the net position report for stocks. Net positions are currently still to the long side even after the decent correction we’ve seen. 

The next leg down will wait for confirmation in the data. Until then sell the rips and, on the down trades, buy quality beaten down stocks that will outperform growth in the months ahead.

Need help with that? Power Income Trader is waiting.

As always …

Live and Trade With Passion My Friends,

Griff