Federal Reserve Chairman Powell sent the clearest signal to date at the Jackson Hole Global Central Bank Annual Meeting, hinting that the Fed will begin cutting interest rates in September. He also believes that the U.S. economy is growing at a "healthy pace," easing concerns about an economic recession
This week (8.19-8.23), the market was dominated by expectations of a Fed rate cut. Fed Chairman Powell sent the clearest signal to date at the Jackson Hole Global Central Bank Annual Meeting, hinting that the Fed will begin cutting rates in September. He also believes that the U.S. economy is growing at a "healthy pace," easing concerns about an economic recession.
After Powell's speech was released, risk appetite increased, with the Dow briefly rising above 41,000 points and the S&P approaching its historical high. The Dow rose nearly 1.3% for the week, the S&P rose 1.5%, the Nasdaq rose 1.4%, small-cap indices rose 3.6%, and chip stocks rose 1.1%.
European stocks followed the rebound of U.S. stocks, rising 1.3% for the week, marking the longest consecutive weekly gain since the end of March.
As Powell "shifted," U.S. bank stocks rose across the board, with regional bank indices performing well, achieving the largest intraday gain in eight months. AI, robotics, photovoltaics, and real estate sectors led the way, while the oil and energy sector lagged.
"Powell's pivot day" saw a sharp decline in U.S. bond yields. Short-term U.S. bond yields fell significantly, with European bond yields following suit.
The U.S. dollar index hit a 13-month low, while non-U.S. currencies strengthened across the board following Powell's shift, with the pound reaching its highest level in nearly two and a half years.
The softening of the U.S. dollar and bond yields supported the rise in precious metals, with London industrial metals collectively rising.
Analysts believe that Fed Chairman Powell's policy shift is complete, as he displayed a comprehensive dovish stance in his speech.
However, renowned Bank of America strategist Michael Hartnett warned that the current Fed rate cuts are due to an economic recession rather than a "soft landing" scenario, which historically has often led to stock market crashes.
According to Hartnett's analysis, Powell has given a total of 6 speeches at the Jackson Hole Annual Meeting, with the S&P falling in 5 out of those 6 instances within the next 3 months, averaging a 7.5% decline