Ward McCarthy - Jefferies


Last quote by Ward McCarthy

They're not going to explicitly say we think we're going to raise in June. They were somewhat dismissive of the inflation picture which would be the primary impediment to a June rate hike.feedback
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May 24 2017
We can learn a lot about a person if we know what types of things he or she talks about or comments on the most frequently. There are numerous topics with which Ward McCarthy is associated, including Fed, September, and market. Most recently, Ward McCarthy has been quoted saying: “Just as February strength was weather-related, March weakness was weather-related, and the solid April number was a return to normal. Q1 has tended to be the weak quarter, not only this cycle but going tack to 1990. How does this figure for the Fed? I think it just keeps them on track which seems to be their preferred 2017 timetable with rate hikes in June and September.” in the article Solid jobs number means Fed on track to raise interest rates and worst fears for the economy ease.
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Ward McCarthy quotes

The ADP will give us some sense of whether that's likely to happen on Friday.feedback

Right now, it's hard to say what's going to capture the market's attention. The market has put last week's hike in the Fed funds rate in a positive light. I think part of the reason the market response has been positive was [the Fed is] not going to four rate hikes.feedback

This market's just waiting to get through all this drivel, all that has to happen before they start negotiating tax cuts, and frankly health care is obviously the first item on the list., but the only reason health care matters from the market's standpoint is it's an obstacle to tax cuts.feedback

We have a date with a rate hike. This is pure muscle across the board. The bond market was fearing the worst and didn't get it.feedback

Higher inflation has not been a good thing in the past for equity markets, as performance generally weakens as inflation rises. A faster pace of rising inflation could bring about more rate hikes, which also weakens returns. As inflation ticks higher, small, mid, and large [cap companies] tend to weaken and vice versa. Inflation heading higher means that interest rates should also rise, and thus valuations for equities falls.feedback

Up to this point, inflation had been creeping higher, but the pace is clearly accelerating. The acceleration in the inflation picture along with the continued strong performance of the consumer sector opens the door and increases the probability that the Fed will raise rates as soon as March.feedback

She's being more balanced rather than overwhelmingly dovish and consequentially means it's broadly hawkish.feedback

The good news was payrolls were muscular, but the bad news was average hourly earnings only grew 0.1 percent. From the Fed's standpoint, this reduces the urgency to push the button.feedback

The [jobs] whisper number is probably above 170,000. That seems to be above consensus call because of ADP, but I think there's a realization that the economic data is taking a back seat to what's going on in Washington. This is usually the honeymoon period, but it's been more like a divorce. What puzzles me is [Trump's] doing everything in reverse order than I thought he would. I thought the warm and fuzzy stuff would come first, get the tax cuts and let everyone submit their list on what infrastructure is wanted.feedback

I'm looking at 190,000 based on the magnitude of the increase in ADP, combined with the rebound in small firm hiring. I think there's some upside risk to that. Now they're back in the show me mode.feedback

The weather wasn't that bad, so the things that would be most likely to make this month weak should not be factors. Since December's number was kind of mediocre, that should limit the downside.feedback

At this point, the Trump trade had a good run. The people who had it on took some profits and now they're kind of waiting in the wings to see if they should jump back in again.feedback

I think we're in a seesaw pattern. A lot of people played the Trump trade well into December or even early January and then took profits on it, and in many cases they see this as a potential opportunity. If stocks did have a break out, it would put more pressure on bonds. I think both markets are going to be in range mode until something signals them to break one way or the other.feedback

Quite frankly, some of the stuff I don't understand. It doesn't help his credibility but it's going to take a while before we figure out his MO. You also haven't made a lot of money if you sold Donald Trump short. It's like when I was a hockey coach. I'm watching the other team warm up, trying to learn from that how they are … I think we can get the big picture by just looking at his appointees. Mostly CEOs. We are now USA LLC with Donald Trump as the CEO and chief negotiator.feedback

Inflation is already on the way. We've seen inflation go from zero to 1.4 percent in 16 months.feedback

We'll be looking at 2.5 percent in the third quarter. You're going to go above the Fed's target in 2017 by half a percentage point.feedback

The new president elect and the congress have to execute on the stimulus proposals, and as that happens, it will start to have ripple effects on growth and inflation forecasts.feedback

There's no mention of fiscal stimulus, so today's rate hike and the expectation for three next year – which is an increase of one hike – all reflects cumulative progress and expected progress against the dual mandate.feedback

Average hourly earnings is disappointing. The drop in the unemployment rate – this is the best of the cycle. You had a huge drop in the level of unemployment and an increase in employment. They're saying things are improving.feedback

It seems the bond market has settled in with rates, at least for the time being. The market is comfortable with it. The stock market still has stars in its eyes.feedback

Frankly, you don't know what he's going to do. He's an unpredictable character, and politicians say a lot of things in elections that never come to fruition. The tone of his campaign initially was very negative with his focus on immigration and trade, and became more positive with the focus on infrastructure and tax cuts. Trump is coming in defining his legacy it. He literally wants to build it.feedback

When you look at Trump's fiscal package – he's Reagan plus infrastructure spending. He's basically faster growth, bigger budget deficits and this probably will give us inflation.feedback

It's good data, the fastest wage growth we've seen this entire cycle. The Fed should have gone this week ... they are well on their way to their objective, and this data is just the latest in a number of data releases that should compel them to get on with it.feedback

It would have been bad for (Fed Chair) Janet Yellen if you had two consecutive meetings with three dissents. It looks like there was probably some kind of agreement on the language and he backed away.feedback

I think they expect to go. I think they want to go, but they're still very skittish. We could see another employment pothole like we did in May, but I don't think that's going to happen. They may be concerned about the reaction to the election.feedback

It could create a little volatility. The market is ho-hum ... so what if the Fed raises 25 basis points. What the market is more interested in is this mixed and muddled message that you're getting from all central banks that maybe they don't want the yield curve as flat as it is.feedback

I think the market would react somewhat, but at the same time, prior history suggests even with that type of pledge, some skepticism is warranted.feedback

There's no muscle in it ... expect for activity at drinking and eating establishments.feedback

Consumers are over two-thirds of the economy. Relevant to next week, there's nothing here that would make the Fed raise rates.feedback

The weakness in retail sales was scattered across a lot of things. It was driven mostly by motor vehicles but furniture sales were weak, building materials were weak.feedback

My take on it is it's post Draghi redux. There's anxiety that the day will come when QE ends. That's why you had such a correlation between stocks and bonds. The reaction would be very different if it really was Fed anxiety.feedback

Today's data supports the case for an increase in the fed funds rate in the foreseeable future as the labor market meanders toward full employment, but is not sufficiently compelling to support a rate hike on September 21.feedback

All she said was the case for a rate hike has strengthened in recent months. The lack of specificity on a timetable looks like it's going to happen later rather than sooner.feedback

It's just not going to happen in September, in my opinion. If anything else, the Fed does not want to throw itself in the crosshairs of this potentially ugly presidential campaign one week before the first debate.feedback

It seems to me like it's still sufficiently noncommittal, that September does not look likely. I do think December is becoming more likely, but I also do not think they will make a commitment to that or start laying the groundwork until at least the November FOMC meeting. They've been burned by trying to set the stage too soon.feedback

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