SVET Reports

SVET Weekly Markets Update (July 25, 2022)

US Census Bureau issues its new home sales data (officially known as Monthly Residential Sales Report) at 9.00 AM, Tuesday July 2022. This report will be the most recent update on slowly-but-surely worsening conditions of the US real estate market, which FOMC analytics receive before FED rate announcement at 1.00 PM, Wednesday July 27.

However, even if June’s home sales figures deviate significantly from the expected 677 thousands (it was 696 in May), it’s unlikely to influence FOMC’s decision. Previous reporting on existing home sales (dropped 5.4%) and new housing starts (dropped 2%) had already signaled that US consumers appetite for improving their living conditions is lessening .

Theoretically, what might slightly shake Board’s believe in the holiness of its actions is the Durable Goods Orders (DGO) report coming out Wednesday July 27 at 07:30 AM, or just prior to FOMC rate announcement at 1.00 PM of the same day.

Greenback gatekeepers’ meeting starts a day earlier (July 26, 9:00 AM) with the current economic and financial situations reviews delivered by FOMC staff and then followed by the so-called ‘Staff Economic Outlook’, the only way DGO might sneak into the picture is through Board’s meeting part known as “Participants’ Views on Current Conditions and the Economic Outlook”.

FOMC decisions are supposed to be ‘data driven’. However, it is widely recognized that voting members tend to follow their chairman as sheep follow a shepherd. Powell — a typical career driven boomer (born 1952), who used to be a Treasury under secretary in the George H. W. Bush’s White House before joining the infamous Carlyle Group as a partner — poses to be ‘neutral’ for cameras.

However, his current over-the-top hawkish position is predetermined by his close affiliation with the Wall Street investment banks establishment. For example, Powell is known to expand credit-through-repo contracts through the roof (some called it the new “Greenspan put”) creating a free-money banansa for Wall Street behemoths. At the same time, if we set 2021 aside, when he pivoted 180 to keep his post before re-appointment in November 2021, Powell can’t care less about the poor state of the real economy.

Additionally, even if media portrait some committee’s key participants to be ‘instinctual’ doves — as, for example, Biden’s appointee and a former Under Secretary of the Treasury in the Obama administration, vice-chair Lael Brainard — all of them are, effectively, bureaucrats fighting each other for a higher position in the political hierarchy. So, no one among them can really be serious in opposing their ‘dear leader’ unless risking to seriously damage his-her own career prospects.

Accordingly, even if DGO deeps in June deeper than projected (minus) 0.2% (DGO was on a decreasing curve since Feb 2022: May — 0.7, April — 0.4, March — 0.7, February — (minus) 0.7) FOMC, obviously, will remain oblivion to those early signs of the upcoming deep economic distress.