The Weekend Edition is pulled from the daily Stansberry Digest.
The Federal Reserve's message is changing...
As many expected, the Fed raised its benchmark lending rate by 25 basis points to a range of 4.5% to 4.75% this past Wednesday. The central bank also said it will continue reducing its holdings of Treasurys and other debt, like mortgage-backed securities.
In other words, it's mostly more of the same story we've been hearing... just with a slower pace of hikes than the 75-basis-point jumps we saw last year. No less importantly, the Fed is changing its tone...
Fed officials seem increasingly leery of doing too much more before seeing what impact the hikes have on the economy.
So far, the Fed-induced economic slowdown has been more of a slow burn. Headline inflation numbers have eased since the summer, and the jobs market hasn't weakened significantly yet outside of layoffs at big tech companies.
The economy hasn't crashed, so the Fed doesn't want to stop "tightening" yet...
But earlier this week, it signaled that time could come soon...
On one hand, in a statement on Wednesday, the central bank's Federal Open Market Committee ("FOMC") said the same thing it has for months...
The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.
On the other hand, that same statement omitted a few key phrases that were included after other recent policy decisions. The Fed no longer thinks the inflation numbers reflect "supply and demand imbalances related to the pandemic" or that the war in Ukraine is contributing to inflation.
And the central bank said for the first time that inflation has "eased somewhat." It said the big question is no longer what the "pace" of rate hikes will be, but the "extent" of them.
To me, that means a regular ol' 0.25% hike or nothing until further notice.
In a post-announcement press conference, Powell cautioned against anyone taking this as a sign that the central bank thinks it already solved inflation. But he also said that " covered a lot of ground" with rate hikes... that the "disinflationary process that you see is really at an early stage," implying the lag effects of policy haven't hit most of the economy yet... and there's "no incentive to overtighten."
Reading between the lines, the Fed is softening the aggressive tightening stance we've seen for about 12 months. "Mr. Market" thought so, too. The benchmark S&P 500 Index reversed from a nearly 1% loss before Powell started speaking on Wednesday to a roughly 1% gain by market close.
And through it all, the jobs market is getting even stronger – at least by some metrics...
Just before the Fed announcement, we saw an interesting note out of the jobs market. The U.S. Department of Labor's latest data showed that job openings in the U.S. rose to 11 million in December, the highest number in five months.
That's about 1.9 openings for every job seeker, close to an all-time high...
This means the jobs market is still tight... which encourages pay increases. That's good news for everyday people. But it's not what the Fed wants to see as it battles inflation.
You see, higher wages mean more costs for businesses, which they'll pass on to consumers. Furthermore, wage growth is substantial right now. Wages rose 7.3% year over year in January, the same rate as December, according to payroll company Automatic Data Processing (ADP). And workers who switched jobs saw a median increase of 15.4%.
This strong labor market – with record-low unemployment and nearly a record ratio of openings to job seekers – certainly doesn't suggest a modest rate of inflation over the long run.
Annual pay raises of 7% won't be sustainable for businesses. Nor will they reassure the Fed that problematic inflation is behind us.
Other numbers from the U.S. Bureau of Labor Statistics paint a more promising picture...
They suggest that the "cost of an employee per hour spent working" (including the cost of worker benefits) is growing at a slower pace than previous highs. Year-over-year growth for the fourth quarter of 2022 was only around 1%, below the Fed's inflation target.
As our Stansberry NewsWire editor C. Scott Garliss showed on Tuesday, this data is called the Employment Cost Index ("ECI"), and it reveals insight about the path of inflation. As Scott said...
After all, every good we consume or service we use typically involves another person. Think about it this way, other humans are involved in assembling an iPhone or making a cup of coffee. And if the cost of those workers is rising rapidly, well so is the cost of your phone and drink.
The ECI also has tracked widely followed headline inflation numbers, as Scott showed by comparing this measure with the Consumer Price Index ("CPI") and core personal consumption expenditures ("PCE") price index, the Fed's preferred inflation gauge...
As he noted...
Both of these charts are pointing to a noticeable trend shift in labor costs. Granted, they're not imploding, but the pace of gains is slowing. And as we can see, that change tracks closely with the different inflation gauges. Consequently, they're easing as well.
However, this measure would still need to fall by half just to get close to "normal" levels again.
Here's what this can tell you...
The pace of headline inflation may be slowing down from record highs, and worker costs are easing, too. But as long as the jobs market remains tight and pay keeps rising to attract workers, the Fed likely won't have much reason to "pivot" and start cutting interest rates to help the economy.
If anything, a super-strong labor market without an obvious recession (that is, one talked about in the mainstream media) favors the status quo. That means the Fed would need to make further small rate hikes – or hold rates around its 5% target until further notice – to make dollars more "expensive" and cool the economy more.
So, while the Fed is softening its stance... we're likely not out of the woods yet.
Moving on, longtime Stansberry Research editor Dr. Steve Sjuggerud broke his nearly two-year silence with a bang...
This past Tuesday, thousands of folks tuned in to his brand-new video event to hear what he had to say. They were treated to a lot, including...
- A game plan for how Steve thinks you should prepare your portfolio not only for 2023, but for the rest of this decade... and why right now could be the best buying opportunity of the next 30 years.
- Insights and a bold prediction from True Wealth analyst Brett Eversole, who Steve describes as "a brilliant analyst with probably the highest mathematical aptitude of anyone I've ever met."
- How to get access to six actionable trade recommendations that Steve believes could each soar more than 1,000% over the next few years... including one stock that he shared for free.
- And whether we've seen the worst of the "Melt Down" yet, or if more pain is still coming...
I won't spoil all the details...
But I can tell you that Steve believes the stock market may be on the brink of resetting into a historic new phase that very few people will see coming.
And while this phase could bring immense opportunity for those who know what to do... it could also mean enormous risk for those who don't. And there's even more at stake for folks who own a particular group of stocks. As Steve said during his event...
The bottom line is, I think a lot of folks are going to walk away from today feeling much better than they did going in.
But you need to understand this, and prepare for what's coming, as soon as possible.
No other Stansberry analyst is telling this story right now... And it could likely have a bigger impact on your money and retirement than anything else we publish this year.
These types of turning points only happen two or three times every century. And it's critical to identify them because, as Steve said, "Not everything will go up." He explained more that night...
On one side, it could very well end up making you more money than you did during the entire bull market of the last decade...
But on the other side... we could see a significant number of stocks – and I'm talking big names that'll shock you – underperform to a degree you may not believe is possible.
Part of the reason is the topic we discussed earlier today – the plans of the Fed – but that's actually only a small piece of the story. Powerful longer-term trends and cycles are at work today that most people are overlooking or aren't even aware of.
This might seem like a lot to understand...
But if you listen to Steve's outlook for yourself, you'll see that it's not as complicated as it sounds.
He and his team have a solution for today's market uncertainty. It's a straightforward, easy-to-understand playbook anyone can use... including the names of a handful of stocks to buy – and some to avoid completely – right now.
If you missed Steve's latest event, you can catch a replay right here for a limited time.
You'll get the full details of what's coming this year, as well as two free recommendations shared during the broadcast. One of these stocks could soar in the months ahead, while the other one – a popular name – could be headed for total disaster.
Don't miss it.
All the best,
Corey McLaughlin
Editor's note: No one else is talking about the story Steve sees unfolding... because most folks don't believe that stocks could soar hundreds of percent over the next few years. But those investors don't realize that the current order on Wall Street is setting up for a full-scale "reset"... And it could send the new market leaders soaring five times or more from here.
This is set to be the most important wealth-building story for 2023... and beyond. That's why Steve's latest market outlook is a must-see event. If you have any money in stocks right now, you need to know what's ahead... and how to both protect yourself and profit from it. You can check out a video of the event for a limited time right here.
