There’s a broad perception that Federal Reserve Chairman Jerome Powell does not care one whit about corporate news. He’s strictly a creature of broad government economic reports — the consumer price index, the producer price index, industrial production, retail sales and, of course, the nonfarm employment numbers. He also cares about what his fellow Fed people say. But for the most part, an earnings blowup is a tree falling in the woods: He’s not around to hear it make a sound. If that’s the case, then market participants should be selling anything that depends on the U.S. economy stabilizing here and forgetting about any company that needs acceleration. These growth stocks are simply casualties of the moment. If you want to own them, you must be prepared to take losses before you see any gains. The few growth names we have in the Charitable Trust, including tech, are particularly worrisome. Even if things just stabilize, that will mean earnings misses and price target cuts from levels when the world was a better place. But what if Powell isn’t tone-deaf. What if he noticed that Nucor (NUE), the best steel maker in the world and the biggest in the U.S, just issued the equivalent of a profit warning and its sheet steel goes into a lot of construction. Or, holy cow, that big miss by FedEx (FDX) late Thursday was so weak that even if new CEO Raj Subramaniam was trying to reset expectations, we want to do our part to not bring on a worldwide recession. Or maybe Powell is seeing that housing starts and mortgage applications are unfathomably weak. Or more importantly, that the best homebuilders — including Lennar (LEN) and KB Home (KBH), which report earnings Wednesday after the Fed meeting — say things are definitely slowing. We know that retail, save Club holding Costco (COST), which also reports this week, has been miserable. We could go on and on with the chemicals and papers folding this week. I, for one, believe the man takes in everything, including all corporate reports of any real size. The question is: Does he want all this pain to happen? Does he want layoffs, which create a larger pool of workers instead of a larger work force? Does he want the so-called services economy to collapse with the goods economy? And, most importantly, can it unfold slowly or does it need to be done quickly? If it is the former, many stocks have already taken quite a beating. If it is the latter, that means more interest rate hikes quickly until that CPI is where he wants it and the the “Help Wanted” signs come down. In that case, nobody has enough cash, and tech is still very dangerous. I don’t want to guess. I accept a 75-basis-point increase to the fed funds rate. I will let Powell tell us if we should be ready for another 75 in November, or if he is willing to wait to see what kind of damage another increase will cause. Keep in mind, it would be the third straight meeting of 75. The tightening cycle began with a 25 in March and a 50 in May, followed by the aforementioned 75s in June and July. (There was no meeting in August.) A 75-basis-point hike at next week’s September meeting would be the prudent move, and Powell has prided himself on…
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