Market Briefing For Wednesday, Feb. 28

Economic assessmentsby the new Fed Chairman were, as expected, along the lines of 'somewhat higher prices', stronger economic outlook; and multiple rate hikes. The market was a bit roiled 'as if' expecting less than a positive tone, which I wouldn't call 'hawkish', but realistic. Makes no sense that equities overreacted given this 'was expected,' but that clearly denotes how sensitive this market is, and on top of the congestion zone that needs to not be penetrated heading South, or look out below.

As I've discussed before, I understand that a cursory glance at more or less total economic activity pictures doesn't reflect the anticipated gains the equity market has already displayed regarding future profitability. To a degree the stock market was up because it 'could' move up with flows of cash within and to the United States; not merely due to 'buybacks'.

We do have an S&P level that requires not only growth but somehow the maintenance of price stability (the Fed's mandate which shouldn't push a desire for inflation but does). Of course that's what we argued 'if Trump won'; that the stock market would soar regardless of 'economic meat' being tangible in the near-term. It was improving but so gradually.

In this evening's brief remarks (as I await my flight back to Florida), we smile a bit as 'Consumer Confidence' has surged to new highs; while the same survey shows 'Stock Market Hope' as somewhat plunging. So what do I make of that? People are smarter than pundits give credit for.

It's perfectly normal (I mention it almost daily) to allow for a stock market that anticipated (discounted) the political, fiscal and monetary change in the past year-plus, to actually rest or correct to various extents, even as the fruition of those policies kick in and levitate the economy 'better'.

In sum:That's my economic argument for later this year; no catastrophe but perhaps a serious correction. And we know that interest rates won't 'by intention' be officially raised too high, because of the huge challenge of 'debt service'. Of course the rub is as I've assessed: they aren't fully in control of that. It's precisely why rates have perked up even as a Fed delay in moving 'official' Funds rates higher stalled (likely due in March).

So while I concur with analysis suggesting the Fed wants to rein in the pace of rate growth (due to not being blamed for a recession or another fiasco in markets); the markets have a way of pushing them behind the curve as we've assessed; even as they took no recent overt action other than letting paper roll off the balance sheet.

Bottom line:the ongoing debate about rates, policies and 'desire' by of course a Fed that knows the fiscal debt expansion level are unusual to say the least in a later stage of a business cycle, tend to be myopic as I have contended. When you factor in the importance of ECB and BoJ as well as BoE moves, you have a better idea of the 'rate relativity' and the amazing fund flows into the US; as well as rates; being nudged upward.

The stock market move persisted; within context of an A-B-C rally but will be long-in-the-tooth, combined with rising complacency again, soon. At the moment it must consolidate and rebound or 'soon' becomes now.