The Weekend Edition is pulled from the daily Stansberry Digest.

The Market Is Appeased... for Now

By Corey McLaughlin

The day after the "day after the election," the national spotlight turned back to finance...

The U.S. central bankers finished their latest policy meeting, and Federal Reserve Chair Jerome Powell held a press conference to try to explain the central bankers' decisions and outlook.

The skinny: a small rate cut (25 basis points) was announced... Powell suggested another could come at the next Fed meeting in December... and maybe most notably, reporters fired a variety of Donald Trump-related questions at Powell.

He predictably tried not to offer much detail... except on one subject. When asked about reports that "some of the president-elect's advisers have suggested that you should resign" and "if he asked you to leave, would you go?" Powell answered directly.

"No," he said.

After Tuesday night's election, the palace intrigue with the Powell and Trump relationship (and that of monetary policy of the Fed and fiscal policy guided by the White House and Congress) is just starting again.

Last time around as president, Trump was critical of the Fed head − to put it mildly. Trump fired off 100-plus Fed and Powell-related tweets, and stumped for lower interest rates, from 2016 to 2020. There's a case to be made that the nagging had an influence...

During this 2024 campaign, Trump suggested he should have more direct influence on Fed decisions. And in February, he said he wouldn't reappoint Powell to lead the Fed. A few months later, Trump softened that stance, but not completely.

In July, Trump said he'd be fine if Powell finished out his term as Fed chair, which ends in May 2026, "especially if I thought he was doing the right thing." That's not exactly a ringing endorsement, or a reason to expect smooth sailing ahead in Fed matters.

Just two days after Trump was elected to a second term, new questions had already emerged...

Following the first question about what he would do if he were asked to resign, Powell was asked if he thought a president – legally – could fire him or any Fed governor.

"Not permitted under the law," replied Powell, a trained lawyer.

We will await the reply (on social media, perhaps) and the conversation that will undoubtedly continue. More substantively, Powell did provide one other answer about how the Fed will weigh any new policies coming from the White House or Congress next year...

In the near term, the election will have no effects on our policy decisions... Many, many things affect the economy... We don't know what the timing and substance of any policy changes will be. We therefore don't know what the effects on the economy will be.

We don't guess, we don't speculate, and we don't assume.

OK. But there are still 72 days before Trump is scheduled to be inaugurated as president for a second time... and before any direct criticisms of Powell land in a meaningful way... and before Trump passes judgment as president on what's "right" and "wrong."

For now, the Fed "juice" continues...

The central bank has lowered rates again, making the cost of borrowing a bit easier once more. And to my mind, this happened almost entirely because the Fed string-pullers feel they have a promise to bankers to fulfill.

If you look at the Fed's supposedly dear "data," the unemployment rate has fallen in the past few months... there are signs that the pace of inflation is picking up again... and GDP (as flawed of a measure as it is) is growing at roughly a 3% clip.

Something doesn't add up.

Perhaps the central bankers are expecting more weakness in the labor market. They may be right about that.

The latest weekly jobless claims published this week (for the week ending October 26) said that 1.89 million people filed claims for "continuing" unemployment benefits.

That's the highest level since November 2021. And the four-week moving average of continuing claims is nearly 1.88 million, which is also the highest in three years.

On Thursday, Powell said the labor market "remains solid" and the Fed wants it to stay that way. However, it's already "less tight than just before the pandemic." Thus, the central bank will probably continue to lower rates to "move to a more neutral" policy stance "over time."

However, the remainder in this equation is the possibility of high(er) inflation – again...

Over the past few months – since the day the Fed cut rates by 50 basis points on September 18 – the bond market has been suggesting investors are expecting higher inflation again. Longer-term yields have risen substantially.

The 10-year Treasury rate – reflective of inflation and growth expectations – is around 4.3% today, up from 3.7% on September 18. The 30-year is near 4.5%, up from 4% over this same span.

Powell said he believes higher yields are "not principally about higher inflation expectations" but "a sense of more likely stronger growth and perhaps less in the way of downside risks." But he added one cautionary note...

We're watching that... We'll see where they settle. It's too early to really say where they settle... We do take financial conditions into account if they are persistent and material, then we'll certainly take them into account with our policy.

But we're not at that stage right now... These things don't really have mainly to do with Fed policy, but to do with other factors in the economy.

We will see...

For today, though...

Investors in stocks (and bitcoin) were generally appeased.

The benchmark S&P 500 Index saw its best post-election performance in history on Wednesday. And the major U.S. stock indexes were up across the board...

The S&P 500 closed 2.5% higher the day after the election. The tech-heavy Nasdaq Composite Index was up 3%. The Dow Jones Industrial Average was up 3.6%. And the small-cap Russell 2000 Index screamed higher by nearly 6%.

But bitcoin has been the biggest post-election winner of any asset class – moving about 14% higher to make a new all-time high above $76,000. Trump is seen as a much bigger cryptocurrency proponent than Kamala Harris.

And while bitcoin and other cryptos are volatile in the short term, the technical and fundamental setup for the world's most popular cryptocurrency is promising over the longer run right now as well...

Bitcoin has convincingly broken above the "downward channel" it had been trading in for much of this year. And we're entering the part of its every-four-year "post halving" timeline that has seen the largest gains, and tops, over the crypto's previous boom-and-bust cycles.

Meanwhile, gold saw an initial sell-off the day after the election. The "chaos" of gold's election-related appeal seemed to be lifting. Then the metal pushed higher by almost 2% on Thursday.

That's a smart move if you ask me. Apparently, Jerome Powell isn't going anywhere... and neither is inflation.

All the best,

Corey McLaughlin

Editor's note: It has been less than a week since the election, and the crypto space is already booming. And while Trump plans to make sure the U.S. is at the forefront of the crypto world, he's not alone... 88% of politicians are pro-crypto.

Our Crypto Capital editor Eric Wade is now certain bitcoin will soon be integrated with our monetary system. And he's forming a special reserve of the altcoins he believes will surge in the coming year... Click here to learn more.

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