It’s the Stock Market, Stupid

Dallas Fed President Logan reaffirmed the Fed's patient stance, while Chicago Fed’s Goolsbee noted little impact on the hard data so far, and reiterated that “the stock market is not the economy”.

Daily Updates:

• Chicago Fed President Austan Goolsbee advocated that the US economy is still solid underneath the surface and that “if we can get past this bumpy period, that the dual mandate still looks pretty good”. So far according to Goolsbee, there has been “surprisingly little direct impact in the data that’s coming out” and over a longer horizon “rates are going to be a fair bit below where they are today if we come back in 12–18 months”.

• Goolsbee also argued that the “stock market is not the economy” and that President Trump’s tariff uncertainty is creating “dirt in the air”. 

• Lorrie Logan, the Dallas Fed President also spoke yesterday at a banking conference where she maintained the view that both sides of the Fed’s dual mandate “appear fairly balanced”, meaning the Fed is “well positioned to wait for the data and to be patient”.

• US manufacturing data yesterday showed factory activity contracted in May for a third consecutive month. 

• The Institute for Supply Management’s Manufacturing Index dropped down 0.2 points in May to 48.5, below the reading of 50 which indicates a contraction, and below the expected 49.5.