What the Fed Wants Now

The Federal Reserve still lacks confidence on inflation... What we heard and saw today... What the Fed wants... The market reacts... More reports on the jobs market... Last call for early-bird conference pricing... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] The Federal Reserve still lacks confidence on inflation... What we heard and saw today... What the Fed wants... The market reacts... More reports on the jobs market... Last call for early-bird conference pricing... --------------------------------------------------------------- Here's what we read from the Fed... As was expected coming out of the Federal Reserve's latest policy meeting this afternoon, the central bank kept its target federal funds rate between 5.25% and 5.5%, which it has maintained since last July... The unknown was what the central bank would say about the pace of resurgent high(er) inflation today and its monetary policy in the future. I (Corey McLaughlin) could always tell you the Fed's answer is – or should be – "we don't know." Nevertheless, Fed Chair Jerome Powell and his colleagues say a lot more and offer clues to investors who care – for better or worse... Today, the Fed's written post-meeting statement published at 2 p.m. Eastern time was similar to what we've seen after recent meetings, though with a few notable adjustments... First, the policy-setting Federal Open Market Committee ("FOMC") acknowledged a "lack of further progress" toward 2% inflation over the last several months. It wants to see the pace of inflation slow... Second, the Fed added some qualifiers to a previous claim that its goals of maximum employment and stable prices were becoming balanced. The FOMC said these goals "have moved toward better balance over the past year," but not that they were currently. In other words, high inflation is still a problem... and the Fed increasingly finds it more concerning than the threat of higher interest rates hurting the labor market. At least, that's how I read it. Ho-hum. The markets, too, remained mixed, as they were much of the day. Then Fed Chair Jerome Powell started talking... Thirty minutes later, Powell took to a podium in Washington, D.C., in front of reporters and cameras to try to explain more. And, in his opening statement, what was left unsaid was most notable... Given "hotter than expected" inflation in the first quarter, Powell didn't volunteer the idea that "peak rates" have been achieved as he has in the past. And he didn't proactively bring up the possibility of rate cuts later this year. This was notable and different... But when reporters quickly asked him about both points at the Fed's post-policy-meeting press conference, Powell notably didn't shut the door on the "status quo" expectation that rates' next move will be down. In fact, he went out of his way to lay out some general scenarios (like the pace of inflation slowing, which hasn't been happening lately, or "unexpected" job market weakening) to show why cuts could still happen... He also said it was "unlikely" the Fed’s next policy move would be a rate hike. As he delivered those answers, the major U.S. indexes shot up, with the benchmark S&P 500 up 1%... and the small-cap Russell 2000 up roughly 2% as he finished his press conference. But then, strikingly, the indexes sold off back into "mixed" territory. The S&P 500 and tech-heavy Nasdaq Composite Index finished slightly down, and the Dow Jones Industrial Average and Russell 2000 were slightly up, as if nothing had just happened the previous hour. If the late-day performance and market reaction seem confusing, it might be appropriate... given the lack of clarity in the Fed's outlook and Powell's signals. It seems the Fed wants to cut rates... Its members want to be "right" about beating inflation. But the central bank just doesn't have an argument right now, given the "hot" inflation data and low unemployment. As I wrote [on Monday]( we entered today predicting that Powell's message would sound similar to the one he delivered during a speaking engagement at an April 17 economic forum. At the Fed's previous policy meeting, the central bank projected multiple rate cuts in 2024 but said it wanted more "confidence" in inflation heading to a 2% rate before doing so. At the event just a few weeks later, Powell told an audience that more recent inflation data "have clearly not given us greater confidence"... and that the Fed will want to see that before cutting rates. As we suspected, today brought a similar message, almost to the word... I also wrote yesterday that I believe Fed officials have begun to fear a full-fledged 1970s-style high-inflation rebound. And we wouldn't be shocked if Powell alluded to the possibility of another rate hike coming next before anything else... He didn't discount the idea entirely but, again, said it was unlikely a hike would be the Fed's next step. "Our policy focus is... how long to keep policy restrictive," Powell said. So, still, even with the pace of inflation above its target, the bent for the central bank is to want to cut rates. One other significant note... After the Fed's previous [policy meeting in March]( Powell, for the first time, indicated that the central bank would "slow down" the pace of its balance-sheet reduction that it has been doing since 2022. "Fairly soon," he said then. "We want to avoid any kind of turbulence." Powell was referring to potential troubles with the banking system since the central bank has chopped $1.5 trillion from its balance sheet over the past two years. In its policy announcement today, the Fed announced that starting in June, it will "slow the pace of decline of its securities holdings" to a maximum of $25 billion in Treasurys per month. Since June 2022, the Fed has been allowing up to $60 billion of Treasurys a month run off its balance sheet. It has also let $35 billion in mortgage-backed securities to mature each month without reinvesting the proceeds, which it will continue doing. The Fed has reduced the size of its balance sheet by about 17% since the middle of 2022. Still, at around $7.4 trillion, it remains almost double what it was before the words "novel coronavirus" entered the global lexicon. About that jobs market... Also today, payroll-processing company ADP published its monthly look at private-sector job trends, and it showed that companies added 192,000 workers in April. This was above Wall Street expectations, though slightly lower than the 208,000 new jobs reported in March. Nearly half of the gains were in the leisure and hospitality sector, along with construction jobs. Worker pay was also up 5% from a year ago – that increase was actually a multiyear low, though still high... and it supports our point yesterday about wage-price spirals. Another labor report released today – the monthly Job Openings and Labor Turnover Survey ("JOLTS") – showed the number of openings in the U.S. staying around 8.5 million. So if you want a new job, you should apparently be able to find one. Friday morning's "nonfarm payrolls" report from Uncle Sam will include an updated unemployment rate and other clues about the labor market. For today – at least based on the data that the central bank is focused on – the U.S. jobs market is strong. But cracks are visible, depending on where you look... As Stansberry Research analyst Mike Barrett [wrote in his Select Value Opportunities advisory today]( "other, more obscure, economic indicators paint a different picture"... Data compiled by The Conference Board global think tank confirms that far fewer "help wanted" ads are being published today compared with a year ago. Its Help Wanted OnLine ("HWOL") Index, which highlights economic movements and ongoing demand in the labor market based on posted job vacancies, dropped 7.8%, from 164.2 in March 2023 to 151.4 in March 2024... Temporary-help ("temp") employment trends are also sending an early warning sign about the true nature of today's job market... You see, when business starts faltering, employers generally fire their temps first. Since hitting an all-time high of 3.2 million workers in March 2022, temp employment has consistently fallen, reaching 2.8 million as of March 2024. The 13.3% decline in temp employment over the past two years means that about 400,000 such jobs have evaporated. As Mike noted, we're not far removed from last week's reports that GDP grew at a smaller-than-expected rate for the first quarter, while high inflation persists. As Mike said... If broad economic growth continues to decelerate, employers won't stop at temps... They'll also start cutting full-time employees. If that happens enough, the unemployment rate rises... and soon enough, you have an obvious recession. But for a lot of investors, inflation questions have become the bigger concern right now. Last Call: 'Early Bird' Conference Tickets The 22nd annual Stansberry Research Conference & Alliance Meeting is in Las Vegas this October. And until midnight tonight, you can get a discounted early-bird ticket and save hundreds of dollars on being there in person... As longtime subscribers know, our annual conference is a gathering of some of the brightest minds in financial research and beyond... You'll hear from your favorite Stansberry Research editors, like Dan Ferris, Eric Wade, Dr. David "Doc" Eifrig, Greg Diamond, and more... plus special invited guests. We recently announced some of our big-name industry speakers, including an ex-CIA spy, an AI expert, and a bestselling author whose books have been made into award-winning films. Our founder, Porter Stansberry, will be there as well. [Click here]( for our full speaker lineup, more event details, and a chance to grab a discounted ticket before this early-bird offer closes forever at midnight tonight. --------------------------------------------------------------- Recommended Links: ['I Haven't Seen These Warning Signals Since 2007 – Watch Out']( Porter Stansberry correctly predicted the 1998 emerging market crisis, the 2008 financial crash, the loss of America's AAA credit rating, and the recent banking collapses. Now, he's stepping forward with an urgent financial warning that goes directly against the establishment's narrative. If you have any money invested in the stock market, you could be blindsided. Until tomorrow, get Porter's exact game plan to prepare [right here](. --------------------------------------------------------------- [Former Goldman Sachs Vice President Reveals Mysterious 'Gold Bank' With Huge Upside Potential]( One analyst says the gains in this trade should be far greater than with just bullion or mining stocks. Some folks had the chance to see 995% gains the last time we shared this exact "gold bank." But most people know nothing about it (except the rich and elite). [See his free reveal right here](. --------------------------------------------------------------- New 52-week highs (as of 4/30/24): Alpha Architect 1-3 Month Box Fund (BOXX), Colgate-Palmolive (CL), Commvault Systems (CVLT), Procter & Gamble (PG), and Trane Technologies (TT). In today's mailbag, your feedback on yesterday's edition, where we previewed today's Fed meeting and announcements and talked about higher inflation... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "The reason inflation isn't getting better is that high interest rates don't tame inflation, they exacerbate it. Moreover, inflation also causes higher interest rates. The former happens because making capital more expensive makes everything else more expensive. Capital, like steel, rubber, fuel, etc., is a basic input for production. How is making it more expensive going to make anything cheaper? The latter [happens] because if I expect the dollars you pay me back with tomorrow to be less than the dollars I loan out to you today, I'll demand a higher interest rate. This is so basic only the morons at the Fed seem incapable of grasping it. "Economic growth also doesn't cause inflation. Once again the opposite is true. The more an economy grows, the cheaper unit costs become, thus economic growth makes most things cheaper. If the Fed would quit causing inflation both by flooding the zone with printed money and by jacking up interest rates in response to the inflation it caused, things would be infinitely better. Not just now – always. We need to get rid of this price-fixing politburo of incompetent economic interventionists and return to first principles of sound money. Today would be good. A hundred years ago would have been better." – Subscriber Sean S. "Greetings, I wrote at the beginning of the hike cycle that a point in time, which can't be readily noticed, would be crossed when the higher rates would become the driver of inflation. Corporations have passed on the higher costs of borrowing as well as Main Street. This creates a higher wage demand which adds to the inflation pressure. This is the consequence of too much too fast. Society doesn't adapt that quickly other than resorting to the path of least resistance, which is to raise prices. It's hitting consumer goods the most and staples like car insurance. It's self-destructive policy... I'd prefer a healthy economy with a healthy equity and bond market versus this chaos." – Subscriber Rodger G. "Of course inflation is up and still troublesome. The last rate hike was last summer when a pause made sense since rates had risen so quickly and we needed a few months to assess the impact. But we're still pumping huge amounts of money into the economy via deficit spending: $1.7 trillion in 2023, $1.4 trillion in 2022, $2.8 trillion in 2021 and $3.1 trillion in 2020, compared to $984 billion in 2019. This is all borrowed money ending up in our economy and fuels more spending. Remember, inflation is not rising prices, it's too much money chasing too few goods. It is and always has been a monetary phenomenon, as [Milton] Friedman said. "In the meantime GDP has been increasing, if the numbers are to be believed. Which makes sense with all the deficit spending. Government spending increases GDP. We have too much money in circulation and good economic growth. That's going [to] keep inflation going. "All the while Mr. Market has been lobbying for rate cuts since they first started to increase. Not because we've had enough rate increases that will tame inflation but because lower rates lets Mr. Market make a lot more money while it harms the worker by not giving them a fair return on their savings. It's financial repression. "Inflation is slowly accelerating. The indices have essentially hit 'support' at around 3% and then trend up and fall back to support. Core inflation is rising faster than total inflation. My guess is inflation will stop bouncing off support and start to go back up. To where I don't know. "In all honesty, rates need to increase again if we are to tame inflation. My rule of thumb is that inflation doesn't get tamed until rates are at least 3 percentage points higher than inflation. With 3-3.25% inflation, we need 6-6.5% rates – up to a 1 percentage point increase – to cool inflation. Maybe more. The longer we wait the harder it will be to tame inflation. The Fed already made that mistake by declaring inflation transitory in 2021 and waiting until March 2022 to raise rates. They are making the same mistake again. "And when has an inflationary period ended without a recession? "Fighting against all this is this fact. Every $1 trillion in new deficit spending adds $50+ billion to the next deficit, virtually ad infinitum. Take rates to 6% and that becomes $60+ billion – $600 billion more over 10 years. "Rates have to go up. Spending has to be cut. The deficit needs to get under 3% of GDP. Then inflation will moderate. It's gonna hurt like hell to get there." – Stansberry Alliance member Mark P. All the best, Corey McLaughlin Baltimore, Maryland May 1, 2024 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open stock positions across all Stansberry Research portfolios Investment Buy Date Return Publication Analyst MSFT Microsoft 11/11/10 1,314.0% Retirement Millionaire Doc MSFT Microsoft 02/10/12 1,234.8% Stansberry's Investment Advisory Porter ADP Automatic Data Processing 10/09/08 879.3% Extreme Value Ferris WRB W.R. Berkley 03/16/12 700.9% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 603.4% Retirement Millionaire Doc HSY Hershey 12/07/07 476.0% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 446.6% Stansberry's Investment Advisory Porter TT Trane Technologies 04/12/18 407.6% Retirement Millionaire Doc NVO Novo Nordisk 12/05/19 364.2% Stansberry's Investment Advisory Gula TTD The Trade Desk 10/17/19 337.7% Stansberry Innovations Report Engel Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 5 Stansberry's Investment Advisory Porter/Gula 3 Retirement Millionaire Doc 1 Extreme Value Ferris 1 Stansberry Innovations Report Engel --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Investment Buy Date Return Publication Analyst wstETH Wrapped Staked Ethereum 12/07/18 2,291.8% Crypto Capital Wade BTC/USD Bitcoin 11/27/18 1,516.4% Crypto Capital Wade ONE/USD Harmony 12/16/19 1,199.9% Crypto Capital Wade MATIC/USD Polygon 02/25/21 799.8% Crypto Capital Wade AGI/USD Delysium AI 01/16/24 372.9% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Microsoft^ MSFT 12.74 years 1,185% Retirement Millionaire Doc Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams PNC Warrants PNC-WS 6.16 years 706% True Wealth Systems Sjuggerud Maxar Technologies^ MAXR 1.90 years 691% Venture Tech. Lashmet Silvergate Capital SI 1.95 years 681% Amer. Moonshots Root ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. --------------------------------------------------------------- Stansberry Research Crypto Hall of Fame Top 5 highest-returning closed positions in the Crypto Capital model portfolio Investment Symbol Duration Gain Publication Analyst Band Protocol BAND/USD 0.31 years 1,169% Crypto Capital Wade Terra LUNA/USD 0.41 years 1,166% Crypto Capital Wade Polymesh POLYX/USD 3.84 years 1,157% Crypto Capital Wade Frontier FRONT/USD 0.09 years 979% Crypto Capital Wade Binance Coin BNB/USD 1.78 years 963% Crypto Capital Wade You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You’re receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. For questions about your account or to speak with customer service, call 888-261-2693 (U.S.) or 443-839-0986 (international) Monday-Friday, 9 a.m.-5 p.m. Eastern time. Or e-mail info@stansberryresearch.com. Please note: The law prohibits us from giving personalized financial advice. © 2024 Stansberry Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Stansberry Research, 1125 N Charles St, Baltimore, MD 21201 or [stansberryresearch.com](. Any brokers mentioned constitute a partial list of available brokers and is for your information only. Stansberry Research does not recommend or endorse any brokers, dealers, or investment advisors. Stansberry Research forbids its writers from having a financial interest in any security they recommend to our subscribers. All employees of Stansberry Research (and affiliated companies) must wait 24 hours after an investment recommendation is published online – or 72 hours after a direct mail publication is sent – before acting on that recommendation. This work is based on SEC filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. It may contain errors, and you shouldn't make any investment decision based solely on what you read here. It's your money and your responsibility.