Danielle DiMartino Booth: When Will Powell Pivot?

Tom welcomes back Danielle DiMartino Booth, CEO and Chief Strategist for Quill Intelligence, a research, and analytics firm.

Danielle discusses the U.S. government's approach to dealing with inflation which includes raising taxes. Should this administration push forward with these plans then consumers will be hit hardest. These measures aren't likely to pass until next year assuming the Democratic party doesn't all but collapse this fall.

She discusses how far astray the current administration and congress have been from following the law. Powell has been sounding quite tough in recent weeks. Had there not been a politically driven Fed leadership crisis rates would probably have been higher. Powell seems more resolute since being re-appointed. It will be interesting to see how far Powell will push the credit markets.

Dealing with supply-side inflation is extremely difficult for the Fed because they simply don't have the tools. Powell is able if he chooses to break the back of the housing markets. Housing, however, is a lagging measure that will push CPI numbers higher. We're going to see dis-inflation first in discretionary purchases which will lower monthly CPI prints.

The numbers indicate a global recession will arrive during 2022 which will translate into demand destruction for oil. Energy companies have been reluctant to reinvest profits since they are concerned about potential political risks.

Danielle discusses what Powell may need to see to pivot his approach. Should economic problems become systemic that would likely be the point. She notes that the current Fed is open to a significant decline in equities.

Lastly, she discusses the dynamics of the housing market and notes the intense speculation in these markets. A recession may create a lot of pressure on housing. There is a lot of leverage in the housing markets but they are mostly in the hands of investors. The downside is building for housing. Population growth rates determine the housing needs but right now it looks like we may be in for glut of supply.

Time Stamp References:0:00 - Introduction0:46 - Tax Hikes & Inflation3:27 - Powell Confirmation7:33 - Easing Inflation?8:59 - Yearly CPI Numbers12:30 - Energy Investment14:14 - Energy Prices & CPI15:18 - FED Leadership16:58 - When Powell Pivot?18:19 - Unemployment Rates?19:17 - Better Metrics?20:48 - Equities & Risk22:00 - Neg. Wealth Effects23:26 - A Big Question25:40 - Housing Risks?28:47 - Supply & Demand30:15 - Wrap Up

Talking Points From This Episode

* U.S. administrations' approach to fixing inflation by raising taxes?* What factors will cause Powell to pivot.* CPI metrics and why supply-side problems are difficult for the Fed to fix.* Housing markets and potential downside factors.

Guest Links:Twitter: https://twitter.com/DiMartinoBoothWebsite: https://quillintelligence.com/YouTube: https://www.youtube.com/c/DanielleDiMartinoBoothQI

Danielle DiMartino Booth is CEO and Chief Strategist for Quill Intelligence LLC, a research and analytics firm.

DiMartino Booth set out to launch a #ResearchRevolution, redefining how market intelligence is conceived and delivered with the goal of not only guiding portfolio managers but promoting financial literacy. To build QI, she brought together a core team of investing veterans in analyzing the trends and providing a critical analysis of what drives the markets.

Since its inception, commentary and data from DiMartino Booth's The Daily Feather have a...