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Powell Put Accounts for Half the Return This Year

by WBI Insights

Another Powell Put is out, and his June 4 comments seem to indicate that a summer rate cut is on the table for the next FOMC meeting.

According to an article by Bianco Research on June 5, 2019, Federal Reserve Chairman Jerome Powell’s statements have significantly impacted market gains.

  • January 4, 2019: “And particularly with the muted inflation readings that we’ve seen coming in, we will be patient as we watch to see how the economy evolves. But we’re always prepared to shift the stance of policy and to shift it significantly if necessary in order to promote our statutory goals of the maximum implement and stable prices.”
  • June 4, 2019: “We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective.”

Powell Puts Are Half This Year's Gains

Comparing the gains on January 4 and June 4 to the rest of the year
IndexS&P 500Dow JonesNASDAQ
January 4 Point Gain (Powell Put 1)84.05746.94275.35
June 4 Point Gain (Powell Put 2)58.82512.40194.10
Powell Put Days Only Point Gains142.871,259.34469.45
Year-to-Date Point Gains296.422,004.72891.84
% Powell Put Days to YTD Gains48.20%62.82%52.64%
Year-to-Date Percentage Gains11.82%8.59%13.44%
Powell Puts Days Only Percentage Gains5.70%5.40%7.08%
Source: Bianco Research

Who saw that coming? Well, we did.

If you are a frequent listener of the Bull|Bear Radio podcast, you would have heard WBI’s experts Matt Schreiber and Don Schreiber, Jr. talking about their hunch on an impending rate cut. Here’s a recap for those who missed it:


Ep 57 – Jan 12, 2019

Don: I think the Fed has made a big policy error in raising rates eight times. Economic growth has been really anemic, the economy isn’t growing fast enough to absorb these rate hikes. We have a 900% rate hike so far in this rate hike cycle from 0.25% interest rate on the Fed funds to 2.5%. The interest rate hike cycle that caused the Financial Crisis was up 425%, and up only 117% before the Dot-Com crash. So the Fed is way out over their skis with a 900% increase in interest rates and I think that’s the major problem. At the same time, they have balance sheets that they’re adjusting, which puts more pressure on interest rates and liquidity.

Here’s what the good news is. I think the Fed’s done, and by the end of 2019, I think they’re cutting rates. And I think that the Powell put goes on steroids because we’ll have easing instead of tightening, and so markets towards the end of the year, seeing that this is coming, could really rocket.

Ep 58 – Jan 17, 2019

Don: There is pretty persuasive evidence in the weakening data sets, both globally and domestically, that are significant causes for concern, because risk of rising markets is increasing. I think the Fed will actually continue to moderate their stance and say, “Interest hikes are over right now, folks.” Maybe they’ll have to cut rates, then markets might trend higher.


Ep 72 – May 31, 2019

Don: Right now the market is looking for a hero, a savior.

Matt: His name may be Jerome.

Don: Powell?

Matt: Yes, that guy.

Don: Fed chairman?

Matt: Yeah, he swoops in like Iron Man and starts lowering rates. It’s a complete possibility.

Don. Hey, it could happen, the bond market is already pushing rates lower. You may have noticed the headlines. Rates are just collapsing, which is an implied easing in the system and the Fed typically will follow the market and may have to cut rates long before they were planning to. That’s what’s going on. And you know the inverted yield curve is going to be weighing on the Fed decision-making on whether or not they actually should cut rates here.

The June FOMC meeting is happening on the 19th, will you be listening?

Source: “The Powell Put Was Exercised Yesterday.” Bianco Research, 5 June 2019, http://www.biancoresearch.com/the-powell-put-was-exercised-yesterday/.

Important Information

Past performance does not guarantee future results. The views presented are those of Don Schreiber, Jr. or Matt Schreiber and should not be construed as investment advice. Don Schreiber, Jr., Matt Schreiber,  or clients of WBI may own stock discussed in this article. All economic and performance information is historical and not indicative of future results. This is not an offer to buy or sell any security. No security or strategy, including those referred to directly or indirectly in this document, is suitable for all accounts or profitable all of the time and there is always the possibility of loss. Moreover, you should not assume that any discussion or information provided here serves as the receipt of, or as a substitute for, personalized investment advice from WBI or from any other investment professional. To the extent that you have any questions regarding the applicability of any specific issue discussed to your individual situation, please consult with WBI or the professional advisor of your choosing. This information is compiled from sources believed to be reliable, accuracy cannot be guaranteed. Information pertaining to WBI’s advisory operations, services, and fees is set forth in WBI’s disclosure statement in Part 2A of Form ADV, a copy of which is available upon request.

You are not permitted to publish, transmit, or otherwise reproduce this information, in whole or in part, in any format to any third party without the express written consent of WBI Investments, Inc.

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