Fed Chairman Powell, “There is no reason why the expansion cannot continue”

Fed Chairman Powell,  “There is no reason why the expansion cannot continue”

$DIA $SPY $QQQ $RUTX $VXX

Tuesday, the Fed Chairman Powell told Congress that the US economy is in a good place.

With risks like trade policy uncertainty receding and global growth stabilizing, “we find the US economy in a very good place, performing well,” Chairman Powell told the House of Representatives Financial Services Committee. The US economic expansion, now in its 11th year, the longest on record.

“There is no reason why the expansion can’t continue,” he said, repeating the central bank’s view that its current target range for short-term borrowing costs, between 1.50% and 1.75%, is “appropriate” to keep the expansion on track.

But, he said, the outbreak of the new coronavirus will impact China and its close neighbors and trading partners, and there will “very likely be some effects on the United States.”

The question we will be asking is will these be persistent effects that could lead to a material reassessment of the outlook,” he said. The answer, he said, is still too early to know.

He defended the Fed’s plan to ease strains in the banking system with Treasury bill purchases and repo operations, and said the central bank will likely reach an appropriate level of reserves around mid-year.

He repeated that combating climate change is the purview of other agencies but that it is the Fed’s job to make sure extreme weather events don’t destabilize the financial system.

And he declined overall to bite on partisan politics.

He said the Fed is focused only on achieving its goals of full employment and stable prices.

Chairman Powell noted that the stronger labor market has made employers more willing to hire people with fewer skills and to train them.

He also pointed to some troubling signs in the labor market including disparities across racial and ethnic groups and a lower rate of labor force participation by individuals in their prime working years than in most other advanced economies.

He noted “subpar” productivity during the current expansion, and said that boosting labor participation and productivity “should remain a national priority.”

Overall inflation based on the price index for personal consumption expenditures was 1.6% in Y 2019, below the Fed’s 2% target. Chairman Powell said he expected it to move closer to the target over the next few months.

Tuesday, the major US stock market indexes finished at: DJIA -0.48 at 29276.25, NAS Comp +10.55 at 9638.96, S&P 500 +5.66 at 3357.75

Volume: Trade on the NYSE came in at 835-M/shares exchanged

  • NAS Comp +7.4% YTD
  • S&P 500 +3.9% YTD
  • DJIA +2.6% YTD
  • Russell 2000 +0.5% YTD

HeffX-LTN’s overall technical outlook for the major US stock market indexes is Very Bullish in here.

Looking ahead: investors will receive the weekly MBA Mortgage Applications Index and the Treasury Budget for January Wednesday. 

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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