Getty Images Jerome Powell may discuss global economic turmoil on Wednesday night.
As popularized in Michael Lewis’s “Liar Poker,” “equities in Dallas” is a derisive term, referring to a low-rung position in the investment banking world where a wayward employee could be sent. (It’s even in the Urban Dictionary.)
Yet “equities in Dallas” also could be the shorthand for Federal Reserve Chairman Jerome Powell’s address Wednesday night, as Dallas is the location for a speech officially titled, “Global Perspectives.”
Since Powell’s remarks about the Fed being “a long way from neutral” in late October, the Dow Jones Industrial Average DJIA, -0.81% has dropped about 5%. That’s coincided with other concerns besides interest-rate policy, of course, ranging from U.S. trade policy to a gridlocked Congress to overseas worries ranging from China to Italy.
Powell has talked about the impact of Fed policy on emerging markets since before he become chairman.
He could use the speech alongside Dallas Fed President Robert Kaplan slated for 6 p.m. Eastern to discuss the implications of Fed hikes on the global economy — as well as the possible blowback the U.S. economy could then see, said Scott Brown, chief economist at Raymond James.
Underscoring that turmoil from overseas, the iShares MSCI Emerging Markets ETF EEM, +0.60% has dropped by 15% this year, vs. the roughly 2% gain for the S&P 500 SPX, -0.76% . Emerging markets have been hit by a variety of factors, including the strength of the U.S. dollar DXY, +0.03% , which has been fortified by the Fed’s interest-rate hikes.
Brown says the Fed so far has pointed out business concerns about tariff and trade policy, even though the official data, in terms of gross domestic product and the consumer price index, has seen little impact. Brown says Powell could address how the Fed views the economic risk of trade policy in 2019 and whether the Fed should go slower in raising interest rates.
Related: Consumer inflation posts biggest jump in nine months on higher cost of gas, rent, used cars, CPI shows
Joseph LaVorgna, chief economist for the Americas at Natixis, says the Fed absolutely should go slower. Beyond another rate hike in December — LaVorgna says the Fed almost has to raise interest rates to have credibility after the barrage of criticism from President Donald Trump — the central bank needs to slow down.
“We know there’s risks on the horizon,” LaVorgna said. “The slowdown in China will add to global capacity, there’s evidence regionally of slower housing. Let’s just wait and see,” he said.
LaVorgna, it should be said, doesn’t expect the Fed to follow that go-slow course, which he said could also have the benefit of steepening the yield curve.
“If you look at the housing market, it’s too strong to say it’s rolling over, but it doesn’t tell you that rates are easy,” he said.
