Milei promised to dollarize and close the central bank. What is he waiting for?
Mary Anastasia O’Grady
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Tag: commentaries
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Opinion | The Cure for the Run on the Argentine Peso
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How a hawkish Fed could kill a baby bull-market rally in U.S. stocks
It is the notion that the Federal Reserve could deliver a hawkish jolt to markets even if it refrains from raising rates when its two-day policy meeting ends on Wednesday.
There are concerns that such an outcome could spark a turnaround in U.S. stocks, especially if an uncomfortably strong reading on May inflation — due this coming Tuesday just as the Fed’s policy meeting is slated to begin — pushes the central bank toward something even more extreme, like delivering a rate increase on Wednesday despite intimating that it plans to abstain.
The May consumer-price index is forecast to rise 4.0% for the year, down from a rise of 4.9%, while the core index, excluding food and energy prices, is seen easing to a rise of 5.3% from 5.5%.
On the other hand, signs that the economy has weakened and inflation has continued to fade would help the Fed to justify skipping a rate increase in June — as several senior officials have suggested it will — while signaling that a potential hike at its following meeting in July could be the final increase for the cycle.
“Softening U.S. data should support calls that a June skip could eventually turn into a July pause. Next week, most of the data is expected to remain weak or little changed: retail sales could be flat m/m, the Fed regional surveys should remain in negative territory, and consumer sentiment will waver,” said Craig Erlam, senior market analyst at OANDA, in emailed commentary.
See: The Fed’s crystal ball on inflation appears off the mark again. Here’s comes another fix.
Wednesday’s meeting comes at a critical time for the market. U.S. stocks have powered ahead for more than six months, with the S&P 500
SPX,
+0.11%
having risen more than 20% off its Oct. 12 closing low, according to FactSet. Just this past week, the index exited bear-market territory for the first time in a year.The index is up 12% so far in 2023, reversing some of its 19.4% decline from 2022, its biggest calendar-year drop since 2008, according to Dow Jones Market Data.
So far this year, highflying tech stocks have helped to paper over weakness in other areas of the market. This has started to change over the past two weeks, as small-cap and value-stocks have lurched suddenly higher, but there are fears that the Fed could hurt the most interest-rate sensitive technology names if Chairman Jerome Powell hints at rates rising higher than investors presently anticipate.
The so-called “Megacap eight” stocks — a group that includes both classes of Alphabet Inc. stock
GOOG,
+0.16% GOOGL,
+0.07% ,
Microsoft Corp.
MSFT,
+0.47% ,
Tesla Inc.
TSLA,
+4.06% ,
Microsoft Corp.
MSFT,
+0.47% ,
Netflix Inc.
NFLX,
+2.60% ,
Nvidia Corp.
NVDA,
+0.68% ,
Meta Platforms Inc.
META,
+0.14%
— have driven nearly all of the S&P 500’s gains this year, according to Ed Yardeni, president of Yardeni Research, who included his analysis in a note to clients.But since the beginning of June, the Russell 2000
RUT,
-0.80% ,
a gauge of small-cap stocks in the U.S., has risen more than 6.6%, according to FactSet data. The Russell 1000 Value Index
RLV,
-0.15%
has also gained nearly 3.7% in that time. During this period, both have outperformed the tech-heavy Nasdaq Composite
COMP,
+0.16% ,
although the Nasdaq remains the market leader, having risen 26.7% since Jan. 1.Concerns about the Fed’s plans intensified this week after the Bank of Canada delivered a surprise interest-rate hike, ending a four-month pause. The BOC’s decision followed a similar move by the Reserve Bank of Australia, and partly as a result, U.S. Treasury yields rose and tech-heavy stocks tumbled, with the Nasdaq logging its biggest drop since April 25, according to FactSet.
While small-caps held up amid the chaos, the reaction stoked fears that something similar might be in store for markets when the Fed delivers its latest decision on interest rates Wednesday.
Consequences of a ‘hawkish pause’
Stocks could be in for more turbulence if the Fed signals it plans to follow the BOC and RBA with a hawkish surprise of its own. And it wouldn’t necessarily need to hike rates to pull this off, market strategists said.
Emerging signs of complacency in the market could complicate its reaction. That the Cboe Volatility Index has fallen back below 15
VIX,
+1.32%
for the first time since before the arrival of COVID-19 is one such sign that investors aren’t worried enough about a potential selloff, said Miller Tabak + Co.’s Chief Market Strategist Matt Maley.Another analyst likened the potential fallout from a hawkish Fed to the bad old days of 2022.
“If the Fed signals that rates will be going up again, the market playbook could read more like 2022 than what we have seen so far in 2023,” said Will Rhind, the founder and CEO of GraniteShares, during a phone interview with MarketWatch.
Perhaps the biggest wild card is Tuesday’s inflation report. If the numbers come in hot, Powell and his peers could face pressure to hike rates without priming the market first.
For this reason, Rhind believes investors are underestimating the likelihood of a hike next week, even as Fed funds futures currently see a roughly 70% probability that the central bank will stand pat, according to the CME’s FedWatch tool.
And Rhind isn’t the only one. Leslie Falconio, chief investment officer at UBS Global Wealth Management, says the Tuesday inflation report could be a make-or-break moment for markets, summing up fears expressed elsewhere on Wall Street in a recent note to clients.
“We believe another rate increase is on the table, and that the CPI release on 13 June, a day before the Fed decision, will be decisive. In our view, another hike won’t have a material impact on the pace of economic growth,” Falconio said.
What should investors watch out for?
Assuming the Fed does forego a hike in June, there are a few key tells that investors should watch for to determine whether a “hawkish pause” is under way.
Perhaps the most important will be how the Fed handles changes to its closely watched “dot plot.” A modestly higher median dot would send an unmistakable signal to the market that the Fed will continue with its campaign of tightening monetary policy, perhaps to the detriment of the market, said Patrick Saner, head of macro strategy at the Swiss Re Institute.
“If the Fed skips but wanted to avoid the impression of the hiking cycle being done, it would need to include a revision of the dot plot. They could justify that with a more resilient GDP forecast and a higher inflation outlook. So I think it is the dots and then the statement that will be in focus,” Saner said during a phone interview with MarketWatch.
Beyond that, whatever the Fed does or says will likely be viewed through the lens of economic data that is due out next week. In addition to the Tuesday inflation report, a report on May retail sales is due out Thursday, and a on consumer sentiment from the University of Michigan will land on Friday. All these data points could influence investors’ impressions of the state of the U.S. economy, and their expectations for how the Fed will behave as a result.
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Notable & Quotable: In California, Marijuana Si, Smoking No – Medical Marijuana Program Connection
[ad_2] MMP News Author‘If signed into law, it would mean by 2073 people wanting to buy cigarettes would have to show ID to prove they are at least 67 years old.’
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Opinion: No, an indictment wouldn’t end Trump’s run for the presidency – he could even campaign or serve from a jail cell
Donald Trump announced his 2024 run for the presidency on Nov. 15. In his address he railed against what he perceived as the “persecution” of himself and his family, but made scant mention of his legal woes.
There is also the not-so-small matter of a Justice Department investigation into the Jan. 6 storming of the Capitol.
The announcement has led some to speculate that Trump may be hoping that becoming a presidential candidate will in some way shield him from prosecution.
Donald Trump has announced his bid to run in the 2024 presidential race. WSJ’s Alex Leary breaks down the challenges the former president will face on the campaign trail, including new political rivals and a waning influence among voters. Photo Composite: Adele Morgan
So, does an indictment—or even a felony conviction—prevent a presidential candidate from running or serving in office?
The short answer is no. Here’s why:
The U.S. Constitution specifies in clear language the qualifications required to hold the office of the presidency. In Section 1, Clause 5 of Article II, it states: “No Person except a natural born Citizen, or a Citizen of the United States, at the time of the Adoption of this Constitution, shall be eligible to the Office of President; neither shall any Person be eligible to that Office who shall not have attained to the Age of thirty five Years, and been fourteen Years a Resident within the United States.”
These three requirements—natural-born citizenship, age, and residency—are the only specifications set forth in the United States’ founding document.
Congress has ‘no power to alter’
Furthermore, the Supreme Court has made clear that constitutionally prescribed qualifications to hold federal office may not be altered or supplemented by either the U.S. Congress or any of the states.
Justices clarified the court’s position in their 1969 Powell v. McCormack ruling. The case followed the adoption of a resolution by the House of Representatives barring pastor and New York politician Adam Clayton Powell Jr. from taking his seat in the 90th Congress.
The resolution was not based on Powell’s failure to meet the age, citizenship and residency requirements for House members set forth in the Constitution. Rather, the House found that Powell had diverted Congressional funds and made false reports about certain currency transactions.
When Powell sued to take his seat, the Supreme Court invalidated the House’s resolution on grounds that it added to the constitutionally specified qualifications for Powell to hold office. In the majority opinion, the court held that: “Congress has no power to alter the qualifications in the text of the Constitution.”
For the same reason, no limitation could now be placed on Trump’s candidacy. Nor could he be barred from taking office if he were to be indicted or even convicted.
But in case of insurrection…
The Constitution includes no qualification regarding those conditions—with one significant exception. Section 3 of the 14th Amendment disqualifies any person from holding federal office “who, having previously taken an oath…to support the Constitution of the United States, shall have engaged in insurrection or rebellion against the same, or given aid or comfort to the enemies thereof.”
The reason why this matters is the Justice Department is currently investigating Trump for his activities related to the Jan. 6 insurrection at the Capitol.
Under the provisions of the 14th Amendment, Congress is authorized to pass laws to enforce its provisions. And in February 2021, one Democratic congressman proposed House Bill 1405, providing for a “cause of action to remove and bar from holding office certain individuals who engage in insurrection or rebellion against the United States.”
Even in the event of Trump being found to have participated “in insurrection or rebellion,” he might conceivably argue that he is exempt from Section 3 for a number of reasons. The 14th Amendment does not specifically refer to the presidency and it is not “self-executing”—that is, it needs subsequent legislation to enforce it. Trump could also point to the fact that Congress enacted an Amnesty Act in 1872 that lifted the ban on office holding for officials from many former Confederate states.
He might also argue that his activities on and before Jan. 6 did not constitute an “insurrection” as it is understood by the wording of the amendment. There are few judicial precedents that interpret Section 3, and as such its application in modern times remains unclear. So even if House Bill 1405 were adopted, it is not clear whether it would be enough to disqualify Trump from serving as president again.
Running from behind bars
Even in the case of conviction and incarceration, a presidential candidate would not be prevented from continuing their campaign—even if, as a felon, they might not be able to vote for themselves.
History is dotted with instances of candidates for federal office running—and even being elected—while in prison. As early as 1798—some 79 years before the 14th Amendment — House member Matthew Lyon was elected to Congress from a prison cell, where he was serving a sentence for sedition for speaking out against the Federalist Adams administration.
Eugene Debs, founder of the Socialist Party of America, ran for president in 1920 while serving a prison sentence for sedition. Although he lost the election, he nevertheless won 913,693 votes. Debs promised to pardon himself if he were elected.
And controversial politician and conspiracy theorist Lyndon LaRouche also ran for president from a jail cell in 1992.
A prison cell as the Oval Office?
Several provisions within the Constitution offer alternatives that could be used to disqualify a president under indictment or in prison.
The 25th Amendment allows the vice president and a majority of the Cabinet to suspend the president from office if they conclude that the president is incapable of fulfilling his duties.
The amendment states that the removal process may be invoked “if the President is unable to discharge the powers and duties of his office.”
It was proposed and ratified to address what would happen should a president be incapacitated due to health issues. But the language is broad and some legal scholars believe it could be invoked if someone is deemed incapacitated or incapable for other reasons, such as incarceration.
To be sure, a president behind bars could challenge the conclusion that he or she was incapable from discharging the duties simply because they were in prison. But ultimately the amendment leaves any such dispute to Congress to decide, and it may suspend the president from office by a two-thirds vote.
Indeed, it is not clear that a president could not effectively execute the duties of office from prison, since the Constitution imposes no requirements that the executive appear in any specific location. The jail cell could, theoretically, serve as the new Oval Office.
Finally, if Trump were convicted and yet prevail in his quest for the presidency in 2024, Congress might choose to impeach him and remove him from office. Article II, Section 4 of the Constitution allows impeachment for “treason, bribery, and high crimes and misdemeanors.”
Whether that language would apply to Trump for indictments or convictions arising from his previous term or business dealings outside of office would be a question for Congress to decide. The precise meaning of “high crimes and misdemeanors” is unclear, and the courts are unlikely to second-guess the House in bringing an impeachment proceeding.
For sure, impeachment would remain an option—but it might be an unlikely one if Republicans maintained their majority in the House in 2024 and 2026.
Stefanie Lindquist is Foundation Professor of Law and Political Science at Arizona State University. She previously taught at Vanderbilt University, the University of Georgia and the University of Texas.
This commentary was originally published by The Conversation—No, an indictment wouldn’t end Trump’s run for the presidency—he could even campaign or serve from a jail cell
More on Trump’s legal problems
Trump Organization executive says he helped colleagues dodge taxes
Judge says he’ll appoint monitor to oversee Donald Trump’s company
Justice Department weighs appointing special counsel if Trump runs in 2024, report says
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What NASA knows about soft landings that the Federal Reserve doesn’t
The Federal Reserve still has a chance to meet both of its main goals — strong economic growth and stable prices — but time is running out to achieve a soft landing.
The problem is that Fed officials are fixated on raising interest rates
FF00,
+0.00%
several more times, including another supersize increase at their meeting Tuesday and Wednesday. They don’t seem to notice that inflation is already retreating significantly, while growth is dangerously close to stalling out.They have a blind spot because they are looking at the past.
Greg Robb: Another jumbo Fed rate hike is expected this week — and then life gets difficult for Chairman Powell
Fed officials ought to reach out to another government agency that has had remarkable success in achieving soft landings: The National Aeronautics and Space Administration.
NASA’s scientists know something the Fed has forgotten: It takes a long time to send and receive messages from space, so they need to account for those delays when sending instructions to their spacecraft so they can land safely on Mars, or orbit Saturn or the moons of Jupiter.
Compounding errors
It’s the same way with the economy. The signals that the Fed receives from the economy are often delayed, sometimes by months. Unfortunately, one of the main signals the Fed is relying upon right now to decide how much to raise interest rates is delayed by a year or more.
I’m talking about inflation in the price of putting a roof over our heads. Shelter prices are now the leading contributor to increases in the consumer price index (CPI) and the personal consumption expenditure (PCE) price index. But because of the way the CPI for shelter is constructed — for very good reasons — the inflation reported today reflects conditions as they were 12 to 18 months ago.
The error is compounded because shelter prices are by far the largest component of the CPI, at more than 30%.
The Fed is disappointed that inflation hasn’t declined more since it began raising interest rates in March, but how could it when the signals about shelter prices were sent last summer and fall, long before the housing market began to cool in response to higher interest rates
TMUBMUSD10Y,
4.049%
and the reductions in the Fed’s holdings of mortgage-backed securities?According to real-time data, shelter prices are no longer rising at a near-10% annual rate as the CPI and PCE price index claim. Growth in rents and house prices has slowed since the first rate hikes in March. House prices are actually falling in most regions of the country, and private-sector measures of rents show that landlords are now dropping rents in many cities.
Just like a radio signal from Jupiter, it takes time for that message to be received by the CPI. It will be received and incorporated into the CPI eventually, but by then it may be too late for the Fed to react. The Fed might crash the spacecraft because it mistakenly believes the messages it gets are in real time.
Growth is slowing
The Fed’s blind spot puts the economy in peril. Recent data show that growth is naturally slowing from the breakneck pace following the pandemic shutdowns but also from the Fed’s relentless squeeze on financial conditions.
It’s very hard to argue that the economy is still overheating. Domestic demand has stalled out since the spring. Final sales to domestic purchasers — which covers consumer spending and business investment — has grown at a 0.3% annual pace over the past two quarters.
Real disposable incomes are growing at less than 1% annualized. Household wealth has fallen off a cliff, with the stock market
SPX,
-0.41% DJIA,
-0.24%
in a bear market and home equity beginning to fall. Wage growth is beginning to slow. Supply chains are improving.And the CPI excluding shelter has gone from rising at a 14% annual pace in the spring when the tightening began, to falling at a 1% annual pace over the past three months. Rate hikes are working!
This benign picture on inflation may not persist. Inflation is still worrisome, particularly for essentials such as food, health care, new vehicles and utilities.
But the Fed should adopt a more balanced view of the economy, no matter what the signals from the past say. No one wants a hard landing.
Just ask NASA.
More reported analysis from Rex Nutting
