Good Monday Morning from your Hometown Lender,
What a weekend!
The news Friday night that the US had stealthily taken out virtually all of Iran’s nuclear military capability froze time for a bit. I will remember for a long time where I was when the news broke. Is the world safer now, yes for sure. Did the US remind the world of our strength, yes for sure as well. Like everything else, it is never a straight line in any direction so unfortunately, intuitively, I suspect there will be a human toll to pay for the strikes. There is news out that Iran is attacking on Americans in Qatar.
Shortly after the attack Friday night, the Iranian Parliament authorized the Ayatollah to close the Strait of Hormuz.
That sent oil prices up almost 10%. Over the weekend, calmer heads have prevailed, and oil is flat giving the rest of the markets a normal trading day. Two Fed governors are now out talking about the Fed should cut soon. They see the writing on the wall that the Fed is in a box. The result for us right now is that bonds are having a good day. The 10yr is down to 4.30% and we are in a decidedly downward yield channel providing we stay and close below 4.35%. That channel looks like resistance could be at 4.20 another 10bps lower from here before we hit some real headwinds.
Below is an excerpt from the WSJ this morning on the Fed..
President Trump escalated his long-running public attack on the Federal Reserve, creating a lose-lose situation for the central bank as it navigates the risks of higher prices and weaker growth from tariffs.
The assault has little modern precedent and forces the Fed to confront a dreadful choice: It could cut rates sharply as Trump demands and risk fueling inflation that damages its credibility with markets. Or it could maintain its current wait-and-see stance, and face further bullying that would weaken its standing if the economy slows sharply and the administration is validated in its view that inflation shouldn’t be a worry.
Fed Chair Jerome Powell faces Congress on Tuesday for regularly scheduled testimony on monetary policy. How lawmakers regard the attack on Powell will be a key gauge of support for Fed independence. The central bank has in recent decades operated with a measure of independence to set monetary policy free of direct political control, which Powell has worked assiduously to defend.
The stakes extend far beyond current policy debates. Powell’s term expires in less than a year. Trump could establish a template for presidential influence that reshapes the central bank, with his relentless criticism serving as both a warning to Powell’s successor and a casting call for replacements who signal they will appease him.
If future central bank leaders feel more compelled to consider political preferences alongside economic data, decades of credibility that anchor global confidence in U.S. monetary policy could be degraded.
On Friday, Trump called on Powell to reduce the central bank’s policy rate, currently around 4.3%, to between 1% and 2% to lower rising costs to service the federal debt.
Other Trump advisers, including Commerce Secretary Howard Lutnick, have amplified the president’s criticisms of monetary policy by arguing that worries about tariff-driven inflation are being exaggerated.
Mr. Powell is in Washington for the semiannual congressional testimony tomorrow and Wednesday. His time as Fed Chairman is ending soon and there is a zero chance that President Trump will renominate him. We will all be listening to what he has to say.
It is a busy week for data.
Today we saw that Existing Home Sales were stingier than predicted but still not growing from previous months. Tomorrow brings Consumer Confidence, Wednesday is New Home Sales, Thursday is Jobless claims, Durable Goods orders, GDP, Friday is PCE, Consumer Sentiment, and Personal Income.
Stay safe and make today great!