It feels like I forgot about something today…
Was it to eat breakfast? Was it to pack for Switzerland?
I know I caught up on the debt ceiling today…
I know I ranted about Kohl’s (KSS) executive team today…
And the news that JPMorgan (JPM) wants to short small-cap stocks.
What was I missing… oh…
That’s right. The Federal Reserve minutes.
The May 2023 Fed Minutes
The Fed Open Market Committee is the central bank group that decides when to engage in open market operations.
These central bank practices include the raising and cutting of rates and the management of its balance sheet. These meetings typically happen eight times per year.
Three weeks after the FOMC concludes its meetings, it releases minutes at 2pm ET on a Wednesday.
These minutes are very detailed recordings of what the policy-making arm of the central bank discussed.
The minutes center on the Fed’s current outlook for the economy, the need for further interest rate hikes or cuts, expectations for inflation, the health of the banking system, and other issues that might influence their monetary decision.
Not only do the minutes offer insight into the Fed as a whole, but they also explore the views of all participants on the committee. We look at the minutes after each meeting to get a better perspective and to provide insight as to what might happen at future meetings.
In the May 3 meeting, the Fed minutes revealed some important views on the economy and its inflation outlook.
Three Critical Points from the Fed Minutes
Let’s look at three critical takeaways from the May 2023 Fed Minutes.
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- The decision by the FOMC this month to raise interest rates by 25 basis points was unanimous. This shows that all members of the voting body were concerned about the state of inflation, despite the recent regional banking crisis that affected the health of the financial system.
- The Fed’s participants have expressed that we might not need to raise interest rates during the June 2023 FOMC meeting. The consensus is that the members will need to take a more data-centric approach before deciding on the next rate decision. Looking ahead, the Fed will receive the data for the May Consumer Price Index (CPI) and Producer Price Index (PPI) during the June FOMC meeting. The debate now centers on whether inflation is coming down fast enough… or whether economic growth cools at such a fast pace that they wouldn’t consider another rate hike until June.
- Last week, Treasury Secretary Janet Yellen suggested that more banking problems are ahead. The FOMC addressed this during their conversation and said they will need to provide more tools to address liquidity in the future. Given that higher interest rates would impact the long-duration bonds held by many banks, we could see these financial institutions’ conditions look bleaker in the short term. We will see if the Fed needs to extend lending to these banks to maintain their solvency or if we will have other institutions face more difficult conditions, as we witnessed in March 2023.
May 2023 Fed Minutes Recap
Finally, remember that the central bank’s voting committee doesn’t meet again until June 13-14. This is in the center of one of the most volatile weeks of the year. Two days after the June FOMC meeting will be the Quad Witching event I explored on Monday.
The next six months are shaping up to be very complicated. We could see higher interest rates, more bank failures, commercial real estate worries, a debt ceiling implosion, and more.
That’s why I highly recommend that investors look out 18 to 24 months – beyond these ongoing crises – and focus their attention on real assets trading at incredible discounts.
Next week, I’ll add another incredible crisis investment in Tactical Wealth Investor. Members will get my full overview of the markets as we approach this critical June period, plus my latest pick that pays incredible dividends and trades at an attractive discount to the sum of its assets. This is how you invest during a crisis… to build solid long-term wealth. Become a member of Tactical Wealth Investor right here.
To your wealth,
Garrett Baldwin
*This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk.
Market Momentum is Yellow
We saw momentum turn negative on the S&P 500 yesterday, another sign of how quickly a market narrative can shift. Last week, major hedge funds told the media how bullish they were on the market… and now we’re seeing selling among… hedge funds. How quickly people forgot about all the bullish chatter from last week and how quickly fear returns.
