Jerome Powell: king of unremarkable
Analyzing JPow's recent remarks to uncover what he's ~really~ saying about interest rates
Some folks call us the Airpods of stock market news, but you can just call us Market Mood: the newsletter that analyzes stock market chatter to help you keep tabs on the news that matters — quieting the noise so you can stay above the hype.
DECIPHERING FED-SPEAK 🗣️
Reading between the lines of Jerome Powell’s FOMC Press Conference
Mother F’in Interest Rates. They’re like the brussel sprouts of monetary policy: no one likes em, but your parents make you eat em anyways (on the claim that it’ll ~save you~ from health issues when you’re old). 🥣
In the case of the US economy, the parents in the room are Fed Chair Jerome Powell & the FOMC, the ‘health issues’ are inflation (& decreasing purchasing power), and we are the wee children with no real say in the matter anyways.
When inflation goes up, the Fed tries to offset it with higher interest rates. And given the way inflation has risen at a record clip over the past year, the Fed has hiked interest rates A LOT.
Like, more than ever before. 👇
A few days ago at the Federal Reserve’s policy committee meeting, Jerome Powell & friends decided to hike rates yet again, bringing the Fed Fund Rate up to a stifling 5-5.25% range. 🥵
Afterwards, JPow held his usual press conference to address the media about the committee’s decision. And like usual, he did his absolute best to avoid saying anything remarkable.
Basically a 7-minute-11-second nothing burger (which is honestly what we’ve come to expect from these press conferences). 🍔
So of course, we decided to run through his press conference transcript ourselves & see if we could uncover anything more than meets the eye in what he had to say. Here’s what we found 👇
JEROME POWELL’S PRESS CONFERENCE: ANALYZED
Combing through the press conference (the full transcript can be found here), the first thing to note is how much ~time~ Powell spent discussing various topics of interest. ⏲️
We identified eight distinct topics buried in his remarks: 1) justification for raising rates to 5%, 2) outlining the Fed’s “commitment” & “core beliefs”, 3) comments on inflation itself, 4) comments on the banking sector, 5) comments on the labor market, 6) comments on GDP & housing, 7) comments on credit conditions, and 8) expectations for rate hikes ahead (or lack thereof).
Here’s what he spent his time talking about:
As you can see, the majority of his time was spent justifying *why* 5-5.25% interest rates are a good idea, and reiterating the Fed’s ‘beliefs’ of “promoting maximum employment and stable prices for the American people”.
Other notes on his time spent: 🔎
He spent a decent chunk of time discussing the banking system, calling it “strong & resilient” (ie. downplaying any potential for continued runs on banks like we’ve seen)
He spent a little time on the labor market, housing, & credit conditions, saying the economy will be ‘likely to face further headwinds from tighter credit conditions’
He spent roughly 40 seconds discussing what future rate hikes might look like, which translated to essentially “we’ll see what happens” — with really no indication of whether this will be the final rate hike of the cycle or not.
JPOW’S TOP KEYWORDS 🔤
We also took a look into how frequently he used specific keywords & phrases during the press conference, and compared these to his previous press conferences.
Here’s the top 20 words used by JPow during the May press conference & the percent change in frequency vs. the previous conference: 👇
Some key points here:
continued to talk *a lot* about ‘inflation’ (mentioning it 20 times) 🔺
talked a lot more about ‘monetary policy’ this time (+167%) 🔺
talked a lot less about ‘banking’ vs. March (-50%) 🔻
mentioned ‘price stability’ considerably less often (-17%) 🔻
mentioned ‘the end’ 0 times (vs. 5 times in March)
We made a full spreadsheet of every single keyword & phrase used by JPow over the past 5 FOMC press conferences, you can check it out for free here 👇
THE TAKE HOME: 👜
To sum it all up, JPow again did his best to avoid saying anything truly remarkable during this month’s FOMC press conference. From what we can gather:
Rate hikes feel like they should be coming to a close, but the door is open for perhaps one more in June.
The Fed appears much less concerned with the banking system than they were in March (despite another major bank collapse 2 weeks ago)
The housing & labor markets are both key points to watch over the next month; any weakness or change of course in either could be cause for a change in the rate trajectory
At the end of the day, if you’re looking for ~spicy nuggets~ about the state of the US economy, Jerome Powell just ain’t the guy to go to (unless you want to spend a few hours trying to crack the code). 😅
OTHER NEWS NUGGETS 🥔
Hot snippets parsed from stock market news
🟢 Palantir (PLTR) soars +25% on earnings beat
“Palantir’s earnings looked like they had something for everyone, as the data-analytics software company forecast its first profitable year and talked up its artificial-intelligence prospects. However, some Wall Street analysts are focused on slowing revenue growth as a reason to be wary of the stock.”
🟢 Snowflake (SNOW) receives analyst upgrade to BUY
“Stifel’s Brad Reback upgrades shares of [Snowflake] to buy from hold on Sunday, writing that recent disclosures from some relevant software peers bode well for Snowflake, while the company is also poised to benefit from growing interest in generative artificial intelligence, the type of AI behind ChatGPT”
🔴 Lucid Motors (LCID) posts bigger loss, falls -8%
“Luxury electric vehicle maker Lucid Group on Monday reported a wider first-quarter loss, but said that it still has enough cash to continue operations into next year. Shares were down over 8% in after-hours trading following the news.”
🔴 PayPal (PYPL) beats earnings, falls -11% on lackluster guidance
“Shares of PayPal plunged Tuesday even though the company reported first-quarter earnings, revenue and total payment volume that topped views. What hurt PayPal stock is that Wall Street seemed unimpressed with the size of the company's raised 2023 outlook.”
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