Good morning, investors. Everyone knows the Fed isn’t expected to cut rates today, so that will lead most market-watchers straight to the central bank’s latest economic outlook within the dot plot.
But even that dot plot will provide less forecasting power than usual.
Dots, with a grain of salt
The Fed’s new dot plot will have a 60-day shelf life.
Jerome Powell’s term ends in May and the policymaker set to replace him sees the world far differently.
Nominee Kevin Warsh believes AI is structurally disinflationary, that the Fed’s balance sheet must shrink, and that the current policy framework needs updating.
That suggests whatever Powell & Co. release in the new dot plot will be a less reliable roadmap than what it’s been in the past.
The Fed isn’t expected to cut rates anytime soon (Chart courtesy of Exhibit A)
To be sure, Warsh does carry a more hawkish track record than most presumed doves.
During his first stint as a Fed governor, he advocated for tighter policy and later resigned from the board over concerns around the central bank’s growing footprint.
That said, it remains possible that his recent alignment with President Trump’s call for lower rates reflects both a genuine ideological shift as well as his instincts to securing the top job.
Either way, Warsh will inherit a complicated economic situation.
Fears of an inflation rebound have accompanied the war in Iran (Chart courtesy of Exhibit A)
The Iran-fueled oil shock gives the Fed more reasons to hold on account of inflationary pressures, and yet the labor market continues to deteriorate.
Job growth has slowed down over the last year (Chart courtesy of Exhibit A)
Those pressures don’t change with the Fed Chair.
While the contents of the new dot plot could move markets in the near term, investors shouldn’t mistake it as a forecast that will set policy come May.
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Market snapshot
Elsewhere
📈 AI could push Amazon to double its AWS sales. Shares of Amazon climbed after CEO Andy Jassy told staff that the cloud business could balloon to $600 billion by 2036. (Reuters)
🛢 Iran knocked out the UAE's Shah gas field and hit Fujairah's oil terminal. Shah supplies 20% of the UAE's gas, and it’s operations remain suspended after a drone strike. (CNBC)
🤖 Nvidia’s Jensen Huang said AI chip demand will hit $1 trillion through 2027. That doubles his projection from five months ago and Huang said the company will likely fall short of demand, a bullish sign for the broader AI trade. (Opening Bell Daily)
Interview
I sat down with JD Durkin of the New York Stock Exchange to discuss why markets keep shaking off bad news, the rotation out of Mag 7, and the risks that could derail the bull run.
Tune in on YouTube, Spotify, or Apple Podcasts.
Rapid-fire
Travel stocks rallied Tuesday as airlines cited strong bookings despite rising fuel costs (CNBC)
Diesel prices topped $5 a gallon in the US for the first time since 2022 (WSJ)
IEA called the Hormuz disruption the largest oil supply shock in the history of global markets (Yahoo Finance)
Nvidia unveiled a space-ready AI chip and Groq 3 processor at GTC (CNBC)
Muddy Waters disclosed a short position in SoFi alleging $312 million in unrecorded debt and off-balance-sheet structure (Investing.com)
The Bank of Japan is expected to hold rates steady this week (The Japan Times)
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On this day
🗓 March 18, 1852: Henry Wells and William G. Fargo incorporated Wells Fargo & Company in New York City with $300,000 in initial capital to provide banking services to Gold Rush California.
Last thing
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