ILUS Stock ,After the scheduled two-day meeting The Fed did exactly as everyone was expecting them to do. They raised rates by about a quarter of a percentage point. It could have been a minor event since bonds had the previous day predicted the odds of it happening. In fact, it was a good thing the market was in a state of shock, Fed Chairman Jay Powell talking tough about how we had an extensive way to go to curb inflation, and saying there was a slim to any chance of cutting rates anytime in the coming year, one may think it would trigger some sort of negative reaction. However, this is the way that the E-Mini S&P 500 futures contract (E/S) responded.
ILUS Stock ,Ilus International Returns vs. S&P
| 1 YEAR | 5 YEAR | 5 YEAR ANNUALIZED | SINCE IPO | |
|---|---|---|---|---|
| ILUS | -74.88% | +451.85% | +40.72% | -99% |
| S&P | -9.40% | +49.13% | +8.32% | +198% |
Assets
QUARTERLYANNUAL
| Q3 2022 | YOY CHANGE | |
|---|---|---|
| Net Cash | $0.31M | -8.8% |
| Accounts Receivable | $0.98M | – |
| Inventory | 0 | – |
Liabilities
QUARTERLYANNUAL
| Q3 2022 | YOY CHANGE | |
|---|---|---|
| Long Term Debt | $0.00M | – |
| Short Term Debt | $0.00M | – |
Ratios
QUARTERLYANNUAL
| Q3 2022 | YOY CHANGE | |
|---|---|---|
| Return On Assets | 7.5% | -91.2% |
| Return On Invested Capital | -118.9% | +0.6% |
Cash Flow
QUARTERLYANNUAL
| Q3 2022 | YOY CHANGE | |
|---|---|---|
| Free Cash Flow | $0.41M | – |
| Operating Free Cash Flow | $7.42M | +1,369.7% |
After the initial dip, it appeared like Powell had delivered a pleasant surprise, and had said something similar to there wouldn’t be any increase even if he was declaring that he might see cuts in the future in the near future.
However, that’s not what he claimed. Instead, he stated that, while there was an improvements in the price data, the main measure the committee was currently following was the employment numbers and said that they would not stop the squeeze until they saw any significant change in those numbers. Also that he’d like to see a negative effect on the economy prior to suspending the hikes would be a reasonable analysis. Yet markets cheered. What is the reason?
The most obvious reason is that traders don’t trust him.
They’ve concluded that because of the fact that Powell was too slow to respond when it was time to begin to increase rates and he’ll also be late in cutting the rate and will have to cut rates before the year’s end. Despite Powell’s protestations or perhaps due to them, it’s hard to blame his reasoning.
He has demonstrated that he can react to data, which could be admirable but causes problems in this particular situation. The data is retrograde because of their nature. in order to avoid being fooled by an outlier, economists tend to focus on patterns over a period of time or look at three-month moving mean data. Powell follows the same method. This means that the committee and Powell will always respond to any major change three months after the date it is announced. In the past, in the world of slow-moving macroeconomics, this wouldn’t be a problem however, in the more rapid world of markets that attempt to anticipate and stay ahead of the events this is what happens.
Thus, traders might believe in the honesty that is Jay Powell when he says that he will be attentive to the state of the labor market and reduce it at the point that the employment numbers begin to rise, but they are also aware that getting it right is virtually impossible and the fact that it is a backward-looking aspect of data makes overshooting the threshold likely. The good thing is that they view the possibility of a policy change as positive for the overall economy, hence the buying.
