Jerome Powell's Speech: Takeaways and Market Reaction

Today, Federal Reserve Chair Jerome Powell spoke…

As I told you on Monday 😎 I’ll share with you the highlights of his speech and how it impacted the markets. 

Key Points:

• The Fed kept interest rates steady at 5.25% to 5.5%, as widely expected.

• Powell said it's unlikely that the next policy move will be a rate hike after being asked multiple times.

• The Fed slowed the pace of its balance sheet reduction more than expected.

• Powell downplayed concerns about "stagflation.”

What Was Expected vs. What Happened:

Ahead of the speech, most market participants anticipated that rates would remain unchanged.

However, Powell's dovish tone and the Fed's decision to slow more than was expected surprised the market.

• The Dow surged over 500 points at its session high.

• The S&P 500 and Nasdaq Composite jumped 0.8% and 1%, respectively.

(As we can see at the end of the speech, the market immediately reversed the entire move)

Despite the recent hot inflation data, Powell maintained that the Fed is not gaining "greater confidence" in reaching its 2% target. This suggests that rate cuts may not be on the immediate horizon.

Notable Quotes:

"I think it's unlikely that the next policy rate move will be a hike. I'd say it's unlikely." - Jerome Powell on future rate hikes.

"It really is to ensure that the process of shrinking the balance sheet down to where we want to get it is a smooth one..." - Powell on slowing the balance sheet reduction.

“I don’t see the stag, or the “flation,” Powell said.

The Bottom Line:

Powell's speech provided some relief to investors as he signaled that the Fed is taking a measured approach to monetary policy. 

Unfortunately, nothing was said or fundamentally changed enough to sustain a move in the markets

His dovish tone failed to make a meaningful impact on the market as opposed to the expected hawkish tone.

So… Stay the course. Sales are still ongoing, and your favorite stock may be up next. 

But you need to be ready because the next big dip IS the one to buy. 🔨🔨🔨 

The last two pivotal points are still to come for the market:

1️⃣ Apple earnings tomorrow 

2️⃣ Fridays Non-Farm Payrolls

How the market digests those two things WILL determine the rest of the year…

Stay tuned for more! 💯

Rooting for you,

Paper Gains.