I’ve seen a lot of posts about the stock market’s reaction to Powell’s last two speeches at the Jackson Hole Symposium. While it’s true that the market didn’t do well in the following two months, the context today is quite different.
In 2022, there’s no need to say why things were different. The Fed was still in the middle of its rate-hiking cycle, and Powell delivered a very hawkish message.
In 2023, it wasn’t the Jackson Hole event that caused the weakness. It was the hot CPI on Thursday the 14th and then the more hawkish FOMC statement on Wednesday the 20th.
Even without these two catalysts in 2023, the market diverged sharply from real yields and eventually caught up with reality before bottoming out and resuming the rally to the Fed pivot in December.
At the moment, we are already entering an easing cycle with resilient growth which is a strong support for stocks as this should lead to lower real yields and boost economic activity.
So, while we can’t know for sure how the market will perform in the next couple of months, I would say that a rally this time around is more likely.
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