This is our weekly market update where we start in the US, cross to Europe and Asia and end in Australia, while covering commodities and crypto on the way.
Weird though it seems, a short speech given by an elderly gentleman in a valley and wilderness recreation area in western Wyoming had the markets on edge all week, following the fall then rise of markets this past few weeks. The mini-stroke that roiled global markets a few weeks ago is a fading memory, with the market resuming its steady march higher; the S&P 500 is now up 19 per cent for the year, and almost 37 per cent from last November, when the current bull market rally really got going.
Of course we are talking about FED Chair Jerome Powell, and his speech at Jackson Hole as part of the Central Bankers’ summer love-in on Friday. Just four minutes and 50 seconds into his speech, he gave the market what it wanted to hear.
“The time has come for policy to adjust,” the Federal Reserve chairman said in his long-awaited speech at the Fed’s annual Jackson Hole symposium.
“The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
As always, the markets heard what they wanted to hear, and acted accordingly, Wall Street leapt higher and bond yields fell.
At the close in NYSE, the Dow Jones Industrial Average added 1.14% to hit a new 1-month high, while the S&P 500 index climbed 1.15%, and the NASDAQ Composite index climbed 1.45%.
But while the rate cut signal is now clear, should markets rally? You may want to reflect on this. In the first 200 days following the first rate cut, equities typically decline by 23 per cent on average. The start of the rate cycle signals the beginning of a deterioration in growth and profits.
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