ECB Is Now Following The Same Steps As The Federal Reserve

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In his Daily Market Notes report to investors, while commenting on the ECB following the Fed, Louis Navellier wrote:

No Relief Until September

What’s going on today in the market is a natural oscillation. The energy stocks and the shipping stocks are down in the last couple of days but today they’re up sharply. So money is not leaving the market. It’s just moving around. That’s good and that’s what you want to see. I’m not surprised the market is consolidating because the last couple of days were pretty strong.

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There are some significant things going on.

The Labor Department on Thursday announced that the Consumer Price Index (CPI) rose 0.8% in February and is now running at an annual pace of 7.9%, which is the fastest pace in 40 years (since January 1982).  The core CPI, excluding food and energy, rose 0.7% and is running at an annual pace of 6.4%. Food prices rose 1% in February, while energy prices soared 3.5%. There is no doubt that inflation, led by food and energy, continues to surge, so 10% annual consumer inflation is very possible in the upcoming months.

The inflation is structural, it's permanent, and I don't see any relief until maybe September. 

Erratic GDP

The Atlanta Fed on Tuesday raised its first quarter GDP forecast to a 0.5% annual pace, up from its previous forecast of 0%.  There are a lot of economic headwinds, so I expect the GDP forecasts will remain erratic in the upcoming months.  However, if the U.S. can avoid a recession, it will be an impressive achievement.

Additionally, the Labor Department announced that weekly unemployment claims rose to 227,000 in the latest week.  Continuing unemployment claims rose to 1.494 million in the latest week.  Although weekly claims were above economists’ consensus expectation of 213,500, the four-week average of continuing claims only rose by 500 to 231,250, so there are no immediate unemployment concerns.

ECB Mimics our Fed

The big surprise on Thursday was that the European Central Bank (ECB) is planning on winding down its quantitative easing in the third quarter before considering any interest rate hike.  Specifically, the ECB said that any interest rate adjustments would take “some time” and be “gradual,” so the ECB will remain at a 0% interest rate despite hideous inflation.

Essentially, the ECB is now following the same steps as the Federal Reserve.  This was a bit surprising, since the ECB pioneered Modern Monetary Theory (MMT), which is unlimited quantitative easing.  Frankly, the ECB maybe worried about recent weakness in the euro, as the European Union slips into a recession. I think we're going to see a lot of central banks around the world moving unison.

Our Fed is winding down quantitative easing, and then next week they're supposed to increase a quarter percent. But I do expect a very dovish FMC statement next Wednesday, and I think the market will rally off of that. 

What's interesting is that politicians are telling us to go buy electric vehicles if we don't like the gas prices. But we can't have an EV revolution right now because of the raw commodity prices. Nickel prices 250% this week, and Russia is a major nickel producer. Long term, I expect Toyota to win the EV revolution since they're introducing solid state batteries in 2025 with Panasonic.

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According to the independent Russian human rights media project OVD-Info, at least 13,836 Russian protesters have been detained by authorities so far. On Sunday, March 6, more than 5,000 demonstrators were taken into custody during demonstrations in 74 cities, including over 2,300 in Moscow alone. The arrests and protests are concentrated in Russia's populous west and decrease significantly toward the east. Source: Statista. See the full story here.