Fed Chair Jerome Powell won't tell the market what it wants to hear: Investment strategist

Chelsea Lombardo
·Production Assistant
Updated

This year’s Economic Policy Symposium has kicked off in Jackson Hole, Wyoming, and on Friday, Federal Reserve Chair Jerome Powell will make his first public remarks since lowering interest rates for the first time in over a decade.

David Waddell, CEO of investment advisory firm Waddell and Associates, told Yahoo Finance’s YFi AM on Thursday that he believes the meeting won’t provide what the markets are looking for.

“Jerome Powell has proven to be pretty inadequate at the microphone,” Waddell said. “What the market really wants to hear is things are good, but we're gonna cut rates a bunch. I think the most likely scenario is that they double down kind of on what they said in the Fed minutes, which we got yesterday, which is things are good.”

“We're thinking about being more cautious,” Waddell continued. “We're thinking about rate cuts. I think [Federal Reserve Bank of Kansas City President] Esther George probably is the pulse of where the Fed is right now — to me, they're behind the curve. Until something changes, they seem to be willing to stay behind the curve... It's really the fundamentals that matter.”

Federal Reserve Chairman Jerome Powell speaks during a news conference following a two-day Federal Open Market Committee meeting in Washington, Wednesday, July 31, 2019. The Federal Reserve cut its key interest rate for the first time in a decade to try to counter threats ranging from uncertainties caused by President Donald Trump's trade wars to chronically low inflation and a dim global outlook. (AP Photo/Manuel Balce Ceneta)

The Federal Reserve on Trade

While the Fed’s Esther George said she still feels uncertain about what’s to come with the ongoing trade war, Waddell explained that Powell and Chinese President Xi Jinping could have the biggest impact on President Donald Trump’s trade war moves.

Yahoo Finance All Markets Summit
Yahoo Finance All Markets Summit

“The Grand Bargain that President Trump has with the United States populace is, as long as you're getting richer and the economy's growing, [he’ll] stay in office,” Waddell explained. “The two people that have control over putting us into recession, really, are, number one, Jerome Powell, who, if he maintains what I think is kind of a tight-fisted approach to interest rates, then he tips the economy further to recession because that's really monetary constraint, not stimulus. Then what's happening with the trade war is fiscal constraint, not stimulus. So what we've got right now is both monetary constraint and fiscal restraint. And the architects of that ... are China and the Fed.”

Chelsea Lombardo is a production assistant for Yahoo Finance. You can find more of her work here.

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