Federal Reserve interest rate policy

REVIEW AND PREVIEW:

Iran’s Revolutionary Guard says it seized a British tanker Friday in the Strait of Hormuz… The move by Iran follows the seizure of an Iranian tanker earlier this month by the British Royal Marines on suspicion it was breaking European sanctions and taking oil to Syria. Iran has called for the release of that ship, and earlier Friday, a British court in Gibraltar extended the detention of the Iranian oil tanker. The move comes a day after President Donald Trump told reporters that the USS Boxer downed a drone belonging to Iran. Iran responded by saying it did not own the drone, and the U.S. may have shot down one of its own. Oil prices moved higher, with West Texas Intermediate up about 1% at $55.98 per barrel just before the close.

President Donald Trump weighed into a simmering debate over Federal Reserve interest rate policy, saying Friday that the central bank needs to end its “crazy” tightening moves. In a series of tweets, the president addressed an unusual controversy stemming from a speech Thursday that New York Fed President John Williams delivered. Market participants initially took Williams’ remarks as indicative that the central bank was prepared to cut rates aggressively, by perhaps a half a percentage point. But a Fed spokesman soon walked back the comments, causing confusion over where policy is headed.

It is the middle of the Mercury retrograde cycle (July 7-31), and also the middle of the Venus opposition to Saturn/Pluto, July 17-21. As the NY Fed President John Williams “walked back” his comments, the markets quickly reacted. Gold and Silver had been on a tear into Friday after Williams’ initial remarks, with Gold reaching a new 6-year high, above $1450, also on the news of the Iranian capture of a British oil tanker and the shooting down of an Iranian drone by the USA (denied by Iran). But then Gold dropped $30 quickly after the “walk back” by Williams’ office regarding his perceived support of aggressive rate cuts. This flip-flopping of claims, denial, walk backs, etc. is classic “trickster” behavior, which is how we often describe Mercury when he is retrograde. Mercury rules news and communications, and when retrograde, snafus and contradictions become the norm. In terms of markets, it correlates with changing sentiment, from bullish to bearish, about every 1-4 days. With Jupiter (exaggeration) still in a waning square aspect to Neptune (confusion, illusion, and delusion) through September, this cosmic combination can be extra confusing to everyone, including market investors.

Nevertheless, world stock indices have continued to hold up relatively well so far under Mercury retrograde. In fact, several indices made new all-time highs last week. Some made these highs early in the week, such as in the USA, and others made yearly or all-time highs at the end of the week, such as in Brazil and Netherlands. Yet others did just the opposite. Some made corrective declines (lows) that ended early in the week, such as in Switzerland, China, and Hong Kong, and others exhibited major cycle lows later in the week, such as in the USA, Europe, Japan, and Australia. These lows were mild, and not indicative of the end of bull markets (yet), except perhaps in India.

In other markets, the big news was in precious metals where Gold continued breaking to new multi-year highs. Silver also joined the advance with its own upside breakout on Tuesday, July 16. By Friday, it was trading above $16.60, a level not seen since June 2018. Crude Oil followed the same pattern as USA, European, and Japanese stocks. That is, it was strong early in the week, then pulled back into the middle of Mercury retrograde, which took place at the end of the week. Bitcoin was interesting too, dropping back to $9000 mark on July 17, down over $4000 from its yearly high of $13,900 area just three weeks ago. By Friday, July 19, it was back up, testing $10,800.

In retrospect, it was a rather wild week, especially for commodities, as a powerful lunar eclipse occurred on July 16, Venus in Cancer opposed the Saturn/Pluto conjunction in Capricorn July 17-21, and the middle of the Mercury retrograde cycle took place on July 19 as the week ended.

 

SHORT-TERM GEOCOSMICS AND LONGER-TERM THOUGHTS

Companies are blaming President Donald Trump’s use of tariffs, not Federal Reserve rates, as the reason behind the slowing U.S. economy, CNBC’s Jim Cramer said Friday. “Most of the companies I’ve talked to, Mr. President, are saying [the slowdown] is because of your tariffs,” Cramer said. “I’m not hearing people blame the Fed as much as they’re blaming tariffs.”

The new week will begin with the Sun entering its ruling sign of Leo. This is the middle of summer in the northern hemisphere, and symbolically it is a time of entertainment, fun, pleasure, parties, and celebrations. It’s a good season to get married, so naturally, I will do that on August 9, when the Sun and Venus will come together and form a harmonious trine aspect (120° arc) to Jupiter, which will be changing directions (from its retrograde to direct motion) in the middle of Sagittarius. It is not only a good time to get married, but a favorable time to come to a trade agreement. And with that hope, a new all-time high in many world stocks indices may come. This time band will remain in effect for 1-2 months, which is why I have stated on several occasions that I expect the USA stock market to make a secondary or all-time high between July and October, and especially in August-September. It has also been (and continues to be) my position that if the USA and China cannot reach a trade agreement during this period, the opportunity will be lost for quite some time, and the stock market will react negatively. It won’t be due to the action – or lack of action – by the Federal Reserve Board. It will be directly related to the inability of the USA leadership to close a trade deal with China. So, here is hoping for not only a successful marriage (in my universe), but a successful trade agreement consummated between the USA and China, and the continuation of a solid world economy as a result.

I am not going to hold my breath on the optimistic outlook for the world economy based on a trade deal being completed for several reasons, many of which relate to geocosmic factors. Fundamentally speaking, this is already the longest period of economic expansion on record, as July begins the 121st month from June 2009.  The previous record was 120 months, from March 1991 through March 2001. Thus, a peak is overdue. Second, historical correlations between the transit of Jupiter and long-term cycle crests in USA stocks are very high when Jupiter is in Sagittarius, which lasts from November 8, 2018 through December 2, 2019. Usually the high will be completed before this transit ends. The last time this 12-year transit was operative was in 2007. Jupiter was in the middle of Sagittarius then, too, when a new all-time-high and long-term cycle topped out in the DJIA at 14,198 October 11, 2007. After the high is in, stocks usually decline sharply to a long-term cycle low 1-3 years later when Jupiter is in Capricorn, Aquarius, or Pisces.

The trade deal is the key (Jupiter in Sagittarius), not the accommodation of world central banks as they resume their nation’s race for the cheapest (lowest priced) currency by commencing another round of monetary easing under the argument that inflation is tamed. The lack of a secure trading environment is already having a strong effect in China, which is experiencing its slowest economic growth in nearly 30 years. And even though this is now the longest period of economic expansion in the USA, it has not been that robust. The annual GDP rate during this expansion has been one of the lowest of any economic expansion on record at only 2.3%, despite record low interest rates.

What happens when interest rates are reduced even further and there is no great growth that follows due to world anxiety over an uncertain world trade situation? What happens when Jupiter moves from Sagittarius to Capricorn, where it will join Saturn and Pluto? It’s like going from the land of plenty (Sagittarius) to the land of scarcity (Capricorn).

The Capricorn stellium of 2020 can actually work out fine if the Capricorn concept of “management” is applied effectively to finances. With Jupiter in Sagittarius, the emphasis is on growth and increasing revenues via increasing one’s world market share, and hence the movement to lower interest rates (and lower currency value) as a stimulus to increase one’s share of world markets. In Capricorn, it will require a balance between revenue growth and the prudent management of expenses in the quest to get a manageable economy. If the treasuries of world nations are “managed” well, all will be well. But if the treasuries believe they can remain above water only through efforts to increase revenues without management of expenditures, there will be trouble. And the name of that trouble is “debt.”