Say hello to Mr.
Ben Emmons, CIO and founder of FedWatch Advisors.
Ben, nice to see you here today.
So I need your take on monetary policy from the Fed.
I just looked at the CME Group FedWatch tool a short time ago.
We're taking off the table interest rate cuts, my friend.
Interest rate hikes now firmly on the table.
What is your outlook for the Fed?
Hey, JD, it's great to be on with you and um thank you very much.
I, I, um, yeah, I think this rate hike is somewhat mispriced, you know, the oil prices, is declining.
We have actually an economy that's OK, generates some inflation, but it's not anytime anything accelerated, so I think this Fed will stay on hold.
I call that like a hawkish hold for some time.
Until the energy shock has sort of tapered off and then see how the economy goes from there, so I think it's a mispriced probability.
I don't really believe that the Federal Reserve will actually start hiking unless inflation starts doing something really strange and starts accelerating.
It might not do something strange, but it's certainly above the Fed's target.
What do you think Kevin Warsh in this new look FOMC does with inflation that remains a bit stubborn, not really going down towards 2% here, Ben.
Yeah, they have to do, of course, acknowledge it, and they have, and there are individual Fed members that are worried about that this is an issue longer term, right?
Like the longer it stays above that target, the more people expect inflation to stay much higher than it normally is further out in the future.
But I think what Kevin Worsham from his thinking is that although that's true, you know, it doesn't mean that we need to slam the brakes and put the economy into a tailspin just to get inflation back to 2%.
And I, I think that is, I think what he will follow, kind of like what the president sort of told him when he was sworn in, let it boom, right?
Don't stand in the way.
I don't think he will sort of follow that, but he acknowledges that if inflation stays high, you cannot really bring this rate that we are right now, say, down to 1%.
That's just not really feasible.
How do you think the markets end up trading a Kevin Warsh-led Fed in terms of monetary policy, strengthening of the dollar or other considerations for investors, Ben?
That's a great, great question, because that's actually what's happening, you know, one thing I noticed is the moment that Kevin Warsh was sworn in, the market started to turn, right?
We've had a stronger dollar.
We had a bit of a move in short-term rates.
We had like a bit more volatility and the stock market not so in good shape, and that really does have to do with that under him, the liquidity will be drained further potentially.
And just having a view so that the Fed should get out of the market, should not influence the markets anymore as much as it used to do.
And that's sort of an adjustment period, but I don't believe, JD, that that will lead to any kind of bear market in the stock market or so, because ultimately if there is a major crisis in the future, Kevin Walsh himself has said the Fed will step in with liquidity.
So I think markets just have to get used to the Fed not so in the markets anymore, speak a bit less, and that's just an adjustment.
So that's why you're seeing the dollar getting stronger.
Ben, I know you brought us stock picks.
They include Citigroup, IBM, FedEx.
Unfortunately, my friend, I'm out of time today, and that's my fault.
Please come back again.
We'll talk about those stock picks and much more.
Ben Emmons, CIO, founder of FedWatch Advisors, my man, come back on the broadcast.
