Will They or Won't They and When?


I’VE been inmarkets since the early 1980’s, and an investment manager with my own firm for the last 28 years since 1996. And trust me, I’ve followed the Fed and what they’ve done (or not done…) very closely over that entire time span.

I coined the phrase “Waiting For Godotspan” during the 1994 Bear Market in bonds when Wall Street and “the news” waited and waited for Alan Greenspan to lower interest rates during what came to be known as the first rolling recession for the way the so-called “soft landing” bounced from one region of the country to another over more than twelve agonizing months.

And I watched and listened as Ben Bernanke said in 2007 that “…troubles in the sub-prime sector of the housing market would be limited and not spill over to the rest of the economy or the financial system…”


AND all the while during those Fed reigns I listened to “the news” hem and haw with their parade of pundits, economists, and analysts echoing each other about when the world could expect the Fed to do something other than what they were doing at whatever time their broken clocks were
waiting to be “right” twice on whatever day…

But never in all those years have I seen such an extreme focus – or obsession –
with “the news” mouthing day in and day out their “will they or won’t they and when” regarding the next phase of the Fed pinballing interest rates up or down as I’m seeing right now in 2024.

Literally morning til night, 24 hours a day, other than AI, this is basically all the financial networks think is on the market’s mind.

And they’ve basically convinced investors that the next thing Jay Powell and the current Fed will do is lower interest rates -- and that when they do the market will go up -- and worse, that whenever this “data dependent” Fed does lower rates, it will be the right thing to do and the right


WELL, sorry folks, but if I’ve learned anything over the past 40 years of observing markets and the economy, it’s that economists, and in particular Fed economists, get it wrong way more than they
get it right.

Jay Powell, even more than other Fed Heads before him, is nothing if not reactionary when it comes to the economy and interest rates. Sure he cloaks his remarks in all kinds of “data dependencies.” But as always, these collections of data are backward looking, late, and ineffective in their response to the Fed’s “dual mandate of maximum employment and price stability.”

The reality is that Powell waits until markets and the economy go to one danger point or another, and then reacts by doing too little too late.

And the odds are good that he will keep to this M.O. whenever it is that he decides he has to do something, anything, to deal with an economy that his drastic reactionary raising of rates is still restricting like a slowly tightening noose.

AND as for the markets, which “the news” has convinced investors can only go up when the Fed finally does loosen the noose and lower rates… well, my well-honed contrarian instinct tells me that there is every possibility that markets will do just the opposite and go down.

For if and when the Fed does finally lower rates, it will be because the economy has suddenly slipped into some danger point, more than likely “slowing too fast,” to use one of economists’ favorite oxymorons -- never mind the reality that the market has already run up to all time highs by just about any measure “ahead of the Fed.”


SO after the market defies the current wisdom yet one more time, economists will all say they “weren’t surprised” even though everything will be going 180-degrees opposite of all their predictions -- because, they’ll say, the market just “bought the rumor and sold the news…”

And so it goes with “the news…”

They’ll just move on and invite the very same pundits right back on their shows to ask them, “how much more will The Fed have to lower to get us out of this slow-down...?”

To which Jay Powell will say, “we’ll follow the data and respond accordingly...”

… as investors who watch “the news” will tally up their losses in the bag they’ll be left holding.



Richard Lees is Founder and Principal of Richard Lees Capital Management, a Registered investment Advisory in Los Angeles, California.