Powell-ese Listening Test
The Powell-ese Listening Test.
Powell takes the stage.
It is the event every investor on the planet both waits for and dreads.
All because of the bombshell remarks from the last FOMC meeting.
The aftershock has barely settled.
And he is back again.
A speech had been on the official calendar all along.
"Sell! Sell! Dump everything!"
"Including the underwear?"
"Leave the underwear for now."
PTSD was only natural.
Wall Street traders were wound tight as piano wire. Powell could flip the market on its head all over again. Another freefall would not have been surprising in the least.
Oddly calm.
Powell's speech, once underway, had no particular spike of drama.
"He's not saying much?"
"Just the usual boilerplate…"
"Huh. Maybe we can actually buy stocks like this."
They had been braced for the worst. The FOMC had barely finished, and he was already out again? There had to be an angle. And yet—nothing special came out of his mouth.
Market-friendly language. A trickle of buying started to form.
The decisive spark for the trend reversal was this:
"He said they saw progress!"
"Inflation's getting reined in!"
"That means we can price the terminal rate lower, right?"
He had said they had seen progress. A phrase that had not existed a week ago. There was a fair guess as to why.
He must have looked at the data.
Initial jobless claims. The University of Michigan five-year inflation expectations. Employment and expected inflation were what the Fed watched closely. Still, it was only a slight shift. No one could be sure the old hawkish stance was truly softening—
He said it himself. The Chairman of the Federal Reserve. There was no more certain, more official statement than that.
"Economy looks good."
"And they hike less?"
"This is straight-up Goldilocks!"
Rate hikes were not pure bad news by default. There was a reason equities had been on an endless tear. Goldilocks—an ideal economy of strong growth without rising prices. Powell might well have been hinting at exactly that.
—Buy order filled!
And investors are creatures who have to be quick on the uptake. You step in one beat ahead while everyone else is still hesitating.
…
…
…
Only after the price had already risen did people realize the remarks had been good news.
ah
What Powell actually said was something retail investors had no real way of knowing. Good news or bad news was hard to tell apart. No—even if you thought you understood—
You could not help but get shaken. Holding your own conviction in a high-volatility market was never easy. Prices rose. People said so. Half-formed beliefs snapped in an instant.
By the time you're squinting at every sentence like a blind man, Wall Street has already finished dumping or ramping the whole thing lmaooooooo
That was human psychology. And it applied to every investor the same way.
Prices had been in freefall for a long stretch. Everyone had been waiting for the rebound that would eventually come. That moment was now. Buyers piled in on top of buyers, and the rally accelerated into a sharp surge.
"Ah, shit. I think we're fucked."
"Maybe we should cover even now…"
"Buy, hurry!"
And a rise called more rise. Markets did not live only on the long side, after all.
Short covering. The players who had loaded put bets and short sales had to scoop shares back before their losses ballooned.
Still, some clung to hope. Maybe Powell would bare his hawkish fangs again.
As the speech wore on, that hope evaporated. Not only was he less hawkish than expected—
"He knows the market situation."
"I really thought he was going to murder the Nasdaq."
"No matter how much he thrashes, he's still in Trump's palm~."
—he was saying exactly what the market wanted to hear. If the Nasdaq crashed too hard, the real economy would not escape unscathed either. Powell understood that point.
There were hawkish lines sprinkled through the middle, but overall he was more dovish than the market had priced in. In other words: good. No bombshell like last time. Still, just in case, people stayed locked in until the final word.
It ended without incident. As the speech wrapped in that warm, market-friendly glow—
"He flipped all of a sudden."
"Not sudden. The data printed soft, and Trump hasn't been sitting still either."
"True! He's been blasting tweets every day lately."
Wall Street was in full celebration mode. The war between the market and the Fed had ended in the market's victory. They now had a clean excuse to push prices higher. They liquidated their put bets and threw a sex party.
Heh.
Without ever seeing Powell's smirk.
The tug-of-war between the market and the Fed was nothing new.
Because this is a market that rises on money the Fed prints.
Why do U.S. equities trend up and to the right? That was the fundamental answer. The Fed's direction and the stock market's direction aligned ninety-five percent of the time. Peer-reviewed paper, actual verification.
"Whoa, prices are going up."
"They're saying the U.S. economy is strong?"
"Sounds like he's spinning it positively…"
But you could not afford to get it twisted. The fact that the market took so much of its cue from the Fed also meant—
the Fed could just as easily take it down.
That was why you had to watch every word out of the Fed with care. Never read it in one dimension.
"Does that sound like good news to you?"
"Yes."
"I may not look it, but I'm high nine-hundreds on the TOEIC."
"I'm one-ten on the TOEFL."
"Is there something wrong with that reading?"
Being decent at English was not enough. Literal translation walked you straight into traps. You had to grasp the background. To know what Powell truly meant to say—
because of the kind of man he was.
Fed Chair. Traditionally an economist's seat. Powell was the first non-economist to hold the job.
"His majors were law and political science. A lawyer by training."
"Ah."
"Wait—why is a lawyer the Fed Chair…"
"Because he talks well."
A modern Fed Chair was not someone who only handled economics. The ability to communicate with markets was prized. And on that front—
Fluent rhetoric. He spoke far more accessibly than the Fed chairs who buried everything in dense economic jargon. At first the market cheered. A dove had flown in, they said, and raised a toast.
Except that was not what it was. You learned, bone-deep, why lawyers were a terrifying profession.
"He said they saw progress on inflation?"
"It's going up again."
"Just ripping higher."
"He's spinning it positively, right!"
"No."
Word games. A lawyer's specialty. One or two words could twist the entire context.
Not "a little." "Little."
It was not that they had seen a bit of progress. The correct reading was that they had seen almost no progress at all.
Increases. Plural. Meaning at least two more hikes. The tone might have been soft; the meaning inside it was not. The so-called iron-fist-in-a-velvet-glove style—the headache kind.
"The whole feel of it just flipped."
"Sounds like he's still planning to hike for a long while…"
"Exactly."
In Korean they said the difference between ah and uh could change everything. That was not a rule that applied only to Korean.
This was a test of catching those buried intentions.
You could call it the Powell-ese Listening Test. It was why future FOMC meetings would become a global spectator sport.
"But he said the economy is strong."
"That depends on the angle too."
"The angle?"
Lawyer by training. Not a single word out of Powell's mouth was chance or slip. Even that opening line about a strong economy—
He had spoken with recent events in mind. There was a man on Twitter sniping at him daily.
"That line was for Trump."
"Ah."
"The 'economy is strong' bit?"
"Meaning: we didn't wreck the economy, so we can hike rates even harder."
No—Mr. President. Even the choice to lead with that as the first sentence carried meaning. Read against that backdrop, the sense flipped. He had not the slightest intention of bending his existing stance.
We're going to keep hiking rates, you know?
We've got a long way to go before inflation is under control~.
Other Fed officials. Their schedules were stacked right after Powell's speech. What the Fed was aiming for—they would deliver it again, with no room for misunderstanding.
"Whoa, it's actually dropping."
"Thin ice. Absolute thin ice…"
"Why does Powell talk like such an asshole?"
"Because it's fun."
Enough to make you miss the old Fed chairs—stiff, maybe, but at least direct. For some people it was a migraine. For others—
it was a chance to make a killing.
Time to ace the Powell-ese Listening Test.