Hey There Income Hunter,

 

The J-Pow moonwalk has begun.

 

This week, Jerome Powell was officially reappointed for another term as Federal Reserve chairman, and in an interview afterwards he made two comments that revealed he is already hedging his ultra- tightening remarks …

 

“If the economy performs about as expected,” Powell said, “it would be appropriate for there to be additional 50-basis point increases at the next two meetings.”

 

In recent months, Powell had underscored the economy’s supposed strength.

 

Now, it is if the economy performs as expected. 

 

He also conceded that the Fed’s ability to go 50 basis points without triggering a recession may depend on factors outside its control.

 

He must have known the consumer sentiment numbers that were released yesterday because they were horrible.

 

Today, we’ll look at those numbers and the reaction for clues on where the market is headed next week. 

 

University of Michigan Consumer Sentiment 

 

Consumer sentiment numbers are crucial to the strength of the economy.

 

First, they’re forward looking, which is critical when you have a Fed that reacts to the rearview. 

 

Secondly, consumer spending represents two thirds of US GDP … so if the consumer is not confident and pulls back spending, the economy is in trouble.

 

Well, guess what? The economy is in BIG trouble because consumer sentiment hit an 11-year low!

 

• The headline sentiment index came in at 59.1, down from 65.2
• A gauge of current conditions dropped to 63.6, which was the lowest in 13 years. 

 

Most consumers attributed their negative assessment to inflation.

 

You can’t blame them since real wages have been hovering around -2.5% for months, forcing them to build record credit card balances. 

 

The mood of the consumer in the US and around most of the world explains why there was an outflow from equity funds in April …

 

Equity Flows Globally

 

 

50% of Consumers Net Worth Is in Stocks & Bonds

 

It should not be any surprise that consumers plan to cut spending dramatically in the months ahead. 

 

So far, more $35 trillion in wealth has been lost during this drawdown in the markets.

 

The real disconnect between reality and Fed policy is that the Fed policy is backward looking in terms of analyzing economic data.

 

That’s why you can have an edge in the market by looking at forward looking data and front-running the Fed’s next moves.

 

>> That’s certainly what I do in my Power Income Trader program. <<

 

It’s obvious to me that the market has already started pricing in a pull back in Fed tightening, which is being led by the bond market. Here is the pull back 10-year interest rates …

 

 

I’ll cover the rates market next week …but I think this is a trade that offers an excellent risk reward to the June 17th expiry as the market continues to re-price the number of hikes the Fed will be able to execute.

 

Bring It Home

 

Power Income Traders will have access to my live Macro Monday session when I will share the inside scoop on what is changing in the bond market that leads me to believe we could see higher bond prices in the near-term – plus the best way to play it. Join us!

 

In the meantime enjoy your weekend and as always …

 

Live and Trade With Passion My Friend,

Griff