Powell & Co. pause as expected, but threaten to hike in July. Whether the markets believe them remains to be seen.

June 14, 2023

Dear Fellow Investor,

The most eagerly awaited Fed meeting since...well, the last one...has come and gone with precisely the result that was expected.

Those expectations were guided, of course, by Fed whispers in advance, which they’re always careful to do to avoid nasty surprise reactions by the markets.

Intentions aside, while Powell and his cronies paused on rate hikes as expected, they did manage to surprise investors a bit with their hawkish rhetoric.

Call it walking the dovish walk at the same time they’re talking the hawkish talk.

The dot plots showed 16 out of 18 officials expect between one and two quarter-point rate hikes still this year, with only two expecting rates to hold steady. In his post-meeting news conference, Chairman Jerome Powell seemed to echo this more-hawkish stance.

Considering how the Fed likes to manage expectations, it will take some significant data points to avoid a quarter-point hike next month.

So the market reaction was, as one might expect, mixed. Gold, which was up as much as $15 before the Fed announcement, shed most of those gains. Silver retained a nice move upward, though, bounding about 1% higher.

Stocks were mixed, with the Dow down about 300 points and the AI-heavier Nasdaq in the green, the Dollar Index lower and the 10-year Treasury yield falling.

Although the Fed is trying to walk a tight-rope with both its actions and rhetoric, a not-insignificant contingent of investors fully expect the Fed to cut rates before the end of the year.

Now that the pause is behind us, we’ll see more focus on when that pivot comes. While a recession is expected this fall, it seems doubtful that the Fed will pivot on the basis of early signs of an economic deceleration that, in fact, was their very goal.

So forecasts of rate cuts are, in my view, predicting some sort of a market crack-up or financial crisis.

We’ll see. The bottom line for now is that inflation is still more than double where the Fed wants it, and they’ve blinked on rate hikes.

This is a much more conducive environment for gold and silver.

With summer now in full swing, seasonality is now working against the bulls in metals and miners, though, giving us time to accumulate some outstanding values in the junior mining sector.

On that note, in our June issue of Gold Newsletter I unveiled two exciting new stock recommendations. One is already up 25%, and I think the other is about to rocket higher any day now.

If you’re not already a subscriber, you can get that June issue — plus a full year’s worth of new recommendations and coverage — by signing up now.

All the best,

Brien Lundin
Editor, Gold Newsletter
CEO, the New Orleans Investment Conference