Jerome Powell's Testimony: Financial Conditions, Jobs, and Real Estate

TLDR; Jerome Powell's testimony before Congress this week may lead to hawkish signals due to financial conditions, job recession, and real estate price expectations.

⏰ Jerome Powell's Testimony

Jerome Powell is testifying before Congress on Wednesday and Thursday, and his remarks on Wednesday are particularly significant.

Congress tends to press hard on Powell during testimony, especially in an election year, to appear proactive.

This may lead to a more hawkish stance.

Financial conditions play a crucial role in Powell's approach, with loose financial conditions likely leading to a more hawkish stance.

Interest rates and stock market performance are key factors influencing financial conditions and Powell's policy decisions.

The possibility of rate cuts in March and beyond is also a point of concern. The market's response to potential delays in rate cuts and the evaluation of sectors at risk are crucial aspects to watch.

The potential impact of the jobs recession is another area of focus. Layoffs in certain sectors, especially legacy sectors, are occurring, but the overall data shows that tech layoffs are down.

This suggests that the jobs recession may not be as severe as anticipated.

Real estate prices, particularly in the single-family housing market, are also a significant consideration.

Despite expectations of price falls, the market has shown resilience, with recovery from price fluctuations.

💼 Banking Crisis

The discussion also touches on the banking crisis, with a focus on the differences between the crisis in 2023 and the current situation.

The 2023 crisis was primarily driven by issues in the venture capital and cryptocurrency space, leading to bank runs and subsequent government interventions.

However, the current banking crisis, particularly at New York Community Bank, is not leading to deposit outflows, indicating that a systemic banking issue may not be imminent.

This suggests that Powell may not be particularly concerned about a banking crisis at this time.

📉 Real Estate Prices

The expectation of falling real estate prices, especially in the single-family housing market, is a key factor.

Despite Powell's anticipation of price falls, the market has shown resilience, with recovery from price fluctuations.

📉 GDP and Construction Data

The recent drop in GDP from an estimated 3% to 2.1% is a concern, especially in light of negative construction data.

While the GDP rate is volatile, the average trajectory remains above 2%, suggesting a potential impact on Powell's stance this week.