Morning 8-27

 Powell   Speech in a nutshell he is expected to pledge to keep rates lower for even longer than was anticipated just a few months ago. The Fed will likely let Inflation run above 2% for an extended period. Today’s speech will not be a formal announcement, Since the FOMC still must vote on it, this will likely happen in September

From Bloomberg Emphasis mine

(Bloomberg) — No prizes for guessing what the highlight of the morning will be, though I suppose it is worth asking the question of what people expect. It seems a little difficult to credit that Powell would lay out a specific set of policy prescriptions, replete with details, for the simple reason that this is not an official FOMC event. He could perhaps confirm the general thrust of how policy will orient itself henceforth. Of course, the practical result over the next few years is likely to be the same: interest rates locked at ZIRP with a heavy dose of QE. In a sense, the only way he could disrupt that view would be to announce that the Fed has designed that average inflation targeting is a load of baloney after all. As fun as it might be to see how markets would react in such a circumstance, I think we all know that it is unlikely to be forthcoming. All that said, with equities having run up sharply in recent weeks, it would not be a massive surprise to see them “sell the fact” after having profited so handsomely from “buying the rumor.” At the very least, one might expect some sort of rebalancing flow out of stocks and into bonds over the next few days, given the magnitude of the month-to-date performance gap. We have also got a bit of data this morning, of course. Between the claims and the GDP report, I am most interested in looking at the corporate profits data, which will capture not only the earnings of large businesses but also those of small business. I can only assume that the contrast between that figure and the performance of large cap listed equities will be very stark indeed. To contact the reporter on this story: Cameron Crise in New York at

 Via IFR “The stage is set for Chair Powell to announce a change in the Fed’s goal that will consist of no longer being pre-emptive in raising rates to keep potential inflation in check, but acting only after inflation has sustainably reached 2%. A shift would entail maybe 2% inflation average over the medium/long-run allowing for an incorporation of overshoot and make-up strategy. A formal statement will come via the statement when the long-term goals are released with the statement this year not reaffirmed due to the strategic review.

 Markets drifting, most sitting unchanged as I type. Weekly Jobless claims in line with roughly 1 million people filing. Hurricane Laura made land fall as one of the most powerful ever to strike Gulf. Waiting on damage assessment for refineries and LNG terminals, gasoline down 2% so not much worry about major hiccup in gasoline supplies. Abbot labs +10% as FDA clears their 15 minute rapid test, Tonight president Trump gives his acceptance speech at white house Extra security Fencing is in place as talk of protesters gathering to try and disrupt the Speech…. Lumber continues to surge. Bank of Korea cut Growth Forecast, Korea is a proxy for all Asian Growth. China performed military action in South China sea I believe fired two types of Missiles …the Yuan traded to strongest levels since Early January   do not sleep on the strong Yuan

.@kaylatausche as we reported yesterday on @CNBC: GOP is refining its “skinny” stimulus proposal to share w/ members this week. Current package is ~$500b, and includes funding for: – Expanded UI (could be up to $400/wk, per SAO)- New PPP loans – Schools – Covid testing- Warp Speed @JakeSherman

🚨🚨NEWS — @MarkMeadows and @SpeakerPelosi expected to talk later this afternoon, per multiple sources. Covid relief talks have been stalled for weeks. They are the two lead negotiators

Laura

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