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Fed Members Address U.S. Economy; Pre-Markets Fall

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Wednesday, June 22, 2022

Lest we forget for a blissful moment, as we did yesterday, that we currently exist in a bear market, Wednesday’s early trading is a splash of cold water, if not a slap in the face. We’ve already given back most of Tuesday’s sizable gains in this morning’s pre-market: the Dow -440 points, the Nasdaq -200 and the S&P 500 -60 points.

There are no notable economic reports due out today, although we will hear testimony from Fed Chair Jay Powell this morning before the Senate Banking Committee on Capitol Hill. Even though Powell has grown into his job by finding ways of being transparent about the Federal Reserve’s general thinking on monetary policy, there isn’t really much good news he has to bestow on the American public. Chances of his testimony giving a positive charge to markets is not highly likely.

Philly Fed President Patrick Harker and Chicago Fed President Charles Evans will also make public appearances today, with Harker later joining Richmond Fed President Tom Barkin for a panel discussion on the Fed’s views of the economy now and into the foreseeable future. But it’s hard to see any chance for a rabbit to be pulled from a hat in any of this discourse: inflation remains high, the Fed is fighting it with higher interest rates, and everyone is wary of a pending recession and/or “stagflation.”

For instance, with the not insignificant tools at the Fed’s disposal, there’s really nothing that can be done about high gasoline prices in the U.S. and around the world — save mass adoption of electric vehicles (EVs), which are currently in short supply. Even if Russia signs a peace agreement with Ukraine today, which it won’t, this won’t immediately lift a boycott on oil and gas imports from the aggressor nation.

And in case you think buying oil and oil products commodities directly will be the answer your portfolio seeks, take a glimpse at WTI and Brent crude oil prices this morning: both -5% or more. Yes, WTI has gained +37% year to date and Brent is up almost +40%, but today they’re selling off like everything else. And if you’re looking toward integrated oil supermajors, you may wish to avert your eyes: ExxonMobil (XOM - Free Report) is -3.5% at this hour, as is Chevron (CVX - Free Report) , and Marathon (MRO - Free Report) is -5.5%.

In short, we’re stuck right now. We do have smart people working on the problems, but solutions are difficult to find and take time to implement. Good thing it’s summertime — we can at least enjoy the sunshine while we avoid checking our portfolio performance for the time being.

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