Washington Scene August-September 2022

Strategist: The Fed Isn’t Trying To Kill The Economy – It’s Trying To End Free Money”

“The (U.S.) Federal Reserve isn’t trying to kill the economy, it’s just trying to end free money,” said veteran strategist John Stoltzfus.

“Free money is bad in our view in that it encourages all kinds of speculation, it inflates asset classes…and it creates instability in the economy,” added Oppenheimer’s chief asset management strategist.

Stoltzfus’ comments come on the heels of the most recent month’s jobs data highlighting continued tight labor market conditions. Market watchers see the latest print as an ‘all clear’ signal for the Fed to keep hiking rates aggressively in order to tame inflation.

“Looks like July will be another 75 [bps], based on the unemployment numbers we had today. It looks like the economy can take it,” said the strategist.

Stoltzfus — known for being one of the biggest bulls on Wall Street — recently scaled back his optimism for the S&P 500 year-end target. He and his team cut back their forecast for the benchmark index to 4,800 from 5,330. Last week, S&P 500 (^GSPC) closed out its worst first half of the year since 1970.

”We’ve got high levels of inflation, 40 years high… so when you look at it, it’s how far can equities go in the rallies,” said Stoltzfus. “At 4800 it essentially implies a fairly flat year.”

The strategist is still bullish on U.S stocks, and the consumer.

“The U.S. consumer when times are tough, gets the vacuum cleaner out, looks for coins behind the seat of the automobile, behind the sofa, and keeps spending to some degree. Not necessarily robust, but more resilient than naysayers would ever think,” he said.

(This article was originally published by Yahoo.com)

Canada, U.S. Have Bilateral Talks On Softwood Lumber Dispute

Reuters recently reported that Canada sees the potential for some movement toward settling a longstanding dispute with the United States over softwood lumber tariffs as the cost of building materials spikes south of the border, adding to four-decade high inflation.

“Given what we are facing around inflationary concerns… this is an issue that we could actually find some movement on,” Canada’s International Trade Minister Mary Ng said in a telephone interview recently.

Ng was due to meet with U.S. Trade Representative Katherine Tai later the same day. The two ministers, along with Mexican Deputy Economy Minister Luz Maria de la Mora, met in Vancouver, marking the two-year anniversary of the new North American trade pact.

“The argument I also make to the U.S. is that the rising housing costs are a concern,” Ng said. “Lowering those tariffs can actually be a part of the solution.”

U.S. inflation accelerated in May at its fastest pace in more than 40 years.

With prices surging for lumber and other building materials, U.S. homebuilders have clamored for President Joe Biden’s administration to remove the anti-subsidy and anti-dumping duties in place on Canadian softwood lumber, ranging from 6.75 percent to 20.24 percent, depending on the producer.

The softwood lumber tariffs are the legacy of a decades-long trade dispute over the structure of Canada’s timber sector that could not be resolved when a quota agreement expired in 2015.

Recently, U.S. Treasury Secretary Janet Yellen said that Biden was not considering cutting tariffs on Canadian lumber as part of potential tariff relief he is considering to fight inflation.

“Our priority has always been ensuring that U.S. softwood lumber producers can compete on a level playing field,” Tai told reporters at a news conference in Vancouver. “Subsidized lumber and dumped imports undermine their ability to compete fairly. This is not a new issue.”

The United States has said that Canadian timber harvested from federal and provincial lands enjoys an unfair subsidy due to low government-set stumpage fees, while most U.S. timber is harvested from private land at market rates.