Equities sold off aggressively, reverting the post-FOMC pop and more. The narrative has flipped back to the Fed needing to impair the economy to control inflation after capitulating to 75bp from their 50bp-per-meeting hike path.

And not helping the market or US dollars cause was weaker US data. Jobless claims at 229k, consensus looked for a pullback to 217k, previous week revised a bit higher. Philly Fed down 5.9pts to 3.3, lowest since May 2020.

But if the Fed opened the door to a supersized G-10 central bank hawkish pivot, the Swiss National Bank and the Bank of England were more than happy to walk through with others joining the cue. No Central bankers worth their weight would put inflation-fighting credentials on the line and import higher energy inflation via a weaker currency.

And in what is a highly ominous signal for stock market investors, given the broader index’s sensitivity to rising bond yields, is that the global race to hike rates is nowhere near the finishing line.


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The S&P 500 has been down 12% in the last two weeks. The big move lower has been broad-based with severe selling for all risk groups thanks to the FED fallout as “Financials Conditions have tightened… and that’s a good thing” Yesterday, Powell confirmed former NY Fed President Dudley’s comments in April hence the read though is the Fed wants tighter financial conditions regardless of how low stock go. In other words, the fabled ” Powell Put” is shelved.

The Fed is cheering for tighter financial conditions to stem inflation when equity fundamentals worsen, and economic activity may just now be rolling over. So do not expect the economy to save the stock market. It is a challenging set up regardless of how bearish the sentiment may be.


Oil prices rose on Thursday in an unthinking reaction after the United States announced new sanctions on Iran.

Indeed, in a shrewd move by the US administration to up Iran sanctions it provides a much-improved Middle East security commitment soundboard ahead of the US President’s Middle East visit, where the discussion will most definitely veer towards OPEC swing producer upping their game and delivering more barrels and laggards to catch up on their quotas.

Against a constant drone attack threat from Yemen’s Houthi rebel group, an Iranian proxy, Middle East producers will be more than eager for the US to show a more significant commitment to Middle East security. And while it remains unclear what such a commitment would entail, one would have to assume the makeup to be like “oil for security” via a defence commitment.

On the inflation front, higher oil prices are the primary driver of consumer price inflation worldwide; let us face it, oil is everywhere. It permeates our daily lives in ways we never think about. So, with Fed and other central banks now focused on headline inflation, not ex-energy, it suggests they are on a mission to or risk even a domestic recession for on-target headline inflation. Powell says, “We’re responsible for inflation in the law, and inflation means headline inflation, so that’s our ultimate goal. ” So now energy prices are pinging loudly on the Fed inflation radar.

While this does not mean oil will tank, it could mean that this year’s sizzling 55 % rally could run out of steam if higher energy prices continue to force the Fed and other central bankers’ hands to hike rates into economically restrictive territory.

As I have suggested in the past, given the global supply shortage, there are only two ways that oil prices can fall 1) a global recession and 2) OPEC delivering more barrels.


Gold is finding support from the weaker dollar, and the global central bank is willing to risk a recession by hiking rates to tame inflation. Economic data has already started to roll over, suggesting after the string of front-loaded massive rate hikes has tamed inflation, rate cuts will begin getting brought forward into 2023 to repair the economic damage left in the hawkish wake.

Asia EM FX currencies are lagging G10 amid the significant reversal in the dollar. DXY is down 1.4% as the market plays the G10 central-bank catchup theme following the shift in SNB and BOE.

If the Yuan and other Asia FX currencies start to catch up to G-10, we could see a pick-up in physical demand from the Asian gold community that remains muted due to weak local currency.

Fed out of the way, the market is shifting back to geopolitical drivers that should continue to support gold in an inflationary world of hurt.


The market is playing the G10 central-bank catchup theme following the shift in SNB and BOE, and in other words, the Fed hawkishness is not occurring in a vacuum as other central banks are more than willing to join the rate hike race.

Focus on the BoJ as vol in USDJPY jumped to nearly 40 as many people expect a BOJ shift. I imagine G10 FX will be slammed if the BoJ disappoints.

Originally published by Stephen Innes, Managing Partner, SPI  ASSET MANAGEMENT