April 30, 2026 – As expected, the Fed did not lower the Fed Funds Rate at yesterday’s meeting. Unexpected was Powell &**#*# over Trump by staying on as a Governor. This leaves the Board at 4-3 against Trump selections.
In my 40+ adult years, I noticed that SCOTUS and most judges do not make rulings based on the letter of the law. They make their decision based on which political party put them into their position. The last people I trust to interpret law are our judges. Now, it is likely the Fed Board will vote in the same way. This could lead to the Fed moving the Fed Funds Rate when the market says don’t. This would be the FIRST time the Fed ever dictated interest rates! How the bond and stock markets react will be very interesting. But, we haven’t got to this event…yet.
ECONOMY – The initial 1st Quarter GDP came in at +2.0%. The early projection for 2nd Quarter is a whopping +3.7%! It was over a year ago the Tariff Tantrum occurred. As I said over and over, tariffs had ZERO chance of sending us into a recession. That case is long closed. Remember all of those people who shouted recession and don’t pay attention to them again.
The stock market is pretty much saying the economy is safe through the 3rd Quarter. With 2nd Quarter GDP very likely to be positive, a recession cannot occur until after this year ends.
A side note about GDP. For the first time, the effect of AI entered the GDP equation. Without AI, First Quarter GDP would have been much lower than +2.0%. This is not a one-time deal. This is now a permanent part of the Economy and GDP. If forecasts come to fruition, we will start seeing 4% and 5% and higher GDP. None of it due to population growth (below 0.7% annually already….btw, I saw a study, that even NAR noted, say there are over 15 million (!!!) vacant houses in the USA…..sort of kills that NAR and NAHB narrative about a housing shortage eh!), FYI, the end game of AGI (remember, AI is cave man era stuff….AGI is the real change to this world) is we will no longer have GDP readings or really an economy. GDP could hit numbers like +100%. It will no longer have meaning. We are 4 or so years away from that though.
The other thing the stock market has disproven over the past few months is the myth that a war is bad for stocks. Not! There have been numerous examples of stocks going up during wartime. Thankfully, I learned as a teenager all of these assumptions about war affecting stocks or earnings many anything on and on were wrong. Fundamentals have nothing to do with the stock market. But, 99.99999999% of people will never believe that. That is a good thing:)
INFLATION – Adding a note about this item on the fly. The Mideast situation entered what I thought might happen when the initial ceasefire was announced – a sort of perpetual ‘dirty’ ceasefire. I believe Trump thinks he can make Iran capitulate by destroying their economy. I don’t think that is possible. Iran and Russia have survived all economic attacks. I think the only way to keep Iran from messing with the Straits is do what Trump said he was about to do – send them back to the time of Persia. Drones are too cheap and numerous to ever stop. So, you have to make it so the enemy surrenders unconditionally – like Japan. I am not condoning anything. Just my observation of what it would take to 100% end this situation.
That said, the point is Oil appears to be set to remain high for an extended period of time. Unlike tariffs, this will result in inflation going up. Transportation is a significant part of most prices. As I mentioned initially, it can take up to 4-6 months for Oil to get to its destination and be used as needed. It will likely take the remainder of the year for higher Oil prices to result in a steadily higher CPI. A moving average of CPI will likely be more useful than monthly figures due to atypical volatility.
Until next time.
Shalom,
The Mann