Many investment and business people hang on every word that the Fed chair speaks. For me, I believe it is a little excessive. No. It is very excessive.
I'm surprised that Powell says anything because his choice of words, manner of speaking, body language is analyzed, over analyzed and more over analyzed. No matter what the man says, there are a million interpretations of his message. That's enough to make him want to keep quiet!
Using a historical perspective, when inflation spikes the Fed quickly raises interest rates and reduces the economy’s money supply. This has been the Fed’s methodology since their inception in the early 1900’s. Why? The Fed has had almost no success controlling inflation once it takes hold. Quick action has been the best approach that the Fed has been able to provide.
So, for me, all the other stuff is just pure theatrics. The Fed will be taking a hawkish stance moving forward. That means the Fed will slow or stop purchases of financial instruments (This activity puts cash into the economy), begin to increase interest rates, and finally, start to sell the assets they have bought over the last 12 years ( This removes cash from the economy).
While their unemployment goal has yet to be reached, rapid inflation can cause a lot more damage and may exacerbate the already difficult unemployment situation.
This is the time to have a portfolio tilted away from highly leveraged, high P/E and speculative stocks. Inflation will affect all stocks but more speculative stocks will feel more pain than conservative ones.
Caveat Emptor
