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November 28, 2018 By Peter Boockvar

Powell

The markets are latching on to two words in the Jay Powell speech, “just below” referring to where he thinks the neutral rate is. We know that no one really knows what the neutral rate really is but I “just below” is different then what he said in October when he said “we’re a long way from neutral at this point, probably.”

Of course we’re playing a game of semantics since after a December rate hike they will be at a rate of 2.25-2.5% which is technically “just below” a possible 3% neutral rate in their mind.

As the focus of the speech is ‘financial stability’ he did talk about the risks in corporate bond land but doesn’t believe it creates a “systemic threat.” He thinks the valuations of stocks are within historical benchmarks.

Bottom line, assuming a hike next month and that 3% is the rate level the Fed wants to get to, then yes they are ‘just below’ where they want to be, at the modeled out ‘neutral rate’. I think today’s comments take off the table FOR NOW the possibility of them wanting to get above the so called 3% neutral rate (assuming that’s what they think it is) and also what the markets are cheering.

Outside of the rally in stocks, the 2 yr yield is lower by 3 bps, the US dollar is getting hit and gold is up $12.

Should we expect a tweet today that Trump now loves Powell?

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About Peter

Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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