Pivot to the Fourth Turning

Control Process
Booms and Busts
Feedback Loops
Travel Plans, Webinars, and Grandkids

The week we’ve been waiting for is here. The Strategic Investment Conference starts Monday, and we have a jam-packed schedule.

This year is clearly the best SIC we've ever had in 19 years—a wide-ranging set of topics dealing with the issues that are most important to each of us. You really should join us. You can watch the videos at your own convenience or read the transcripts or treat it as a podcast. Attendees say it is clearly the best information they get all year. You should be one of them! Sign up to see it all online.

Next week also brings what could be a pivotal Federal Reserve policy meeting. We use this word “pivotal” to say an event is important. Taken literally, it means to turn in a different direction than you were previously going.

For the last year the Fed’s direction has been quite consistent: Every FOMC meeting ended with an interest rate increase. Jerome Powell’s crew observed, correctly though very belatedly, that inflation was a serious economic threat and acted to stop it. One can take issue with their specific tactics or timing (as I do), but most every Fed-watcher I know agrees the FOMC has been directionally correct since the “pivot” against inflation.

That consensus is starting to break down. As tighter policy has more noticeable effects, some think the Fed has gone too far and should loosen up. A smaller number think the Fed should tighten even more. The largest group is somewhere in between. I’m in that category, which thinks inflation has stabilized at least enough to pause (at least after this rate hike) and reassess.

The choice isn’t simply “pause vs. pivot” as the media likes to frame it. If a pivot is a change of direction, then a pause is a pivot. It means interest rate policy’s direction changes from upward to sideways. That’s not the same as reducing rates but it’s definitely an important change.

My Still Rethinking the Fed letter drew a lot of interesting feedback, some of which I’ll share with you today. I say “interesting” because it was quite different from the feedback the same letter (more or less) received in February 2022. I think that illustrates how attitudes change with circumstances. Back then, almost everyone agreed that we needed to deal with inflation.

Of course, higher interest rates have brought changes with them. When the situation changes, adept investors change, too. Sometimes we have to think the unthinkable.