Business & Investment

Jerome Powell: Powell’s slave stock can be seen tapering without many tantrums

Cut Stimulation, And say goodbye Stock marketArmor. It was a 10 year bet. Now that time has come. However, there are no signs of a catastrophe.

Bulls can appreciate the stage crafts Jerome Powell, NS Federal Reserve Chairman who gave the strongest signal to date that the central bank will start on Friday Tapered Monthly bond purchases this year. Not only was the horrifying T-word unable to stop the steady rise in stock prices, but the S & P 500 Index recorded the largest rise in a month, entering the second best Jackson Hall week since 2014. rice field.

Powell did enough to maintain the view that his goals were in line with investors’ goals. It’s an approach to growth fast enough to boost employment and profits, not inflation, and a stimulus to avoid shocks and leave real interest rates unchanged. Powell’s message has eased tensions, while other Fed speakers have recently been worried about hawkish remarks.

Michael Alone, Chief Investment Strategist for State Street Global Advisors’ USSPDR business, said: “I think they can take a little winning lap.”


In 2013, news that the Fed delayed the purchase of government bonds and mortgage-backed securities after the global financial crisis caused market turmoil. Investors rushed to sell high-risk assets for bond security in an episode called “Tapered Tram.”

But bad memories of that shouldn’t stimulate the notion that future pairing of asset purchases will do the same, said Art Hogan, chief strategist at National Securities.

“What happened in 2013, in contrast to what’s happening today, was a taper drive-by announcement,” he said in a telephone interview. “Today we have the opposite of the drive-by-taper announcement-we have a well-chosen and well-telegram plan, and transparency is any disadvantage as it is so well known. Market reaction has also been reduced. ”

Dallas Fed President Robert Kaplan told Bloomberg in June that policymakers have learned lessons since 2013 and want to avoid repetition. And, according to the minutes of the rally, the hint that the taper will begin by the end of the year has been in public records since at least the Federal Open Market Committee meeting in July.

Central banks have purchased $ 80 billion in Treasury bills and $ 40 billion in mortgage-backed securities each month since last year to support the U.S. economy during the pandemic, with stocks historically recovering during the pandemic. It is often cited as a reason. And there are many questions about the timing of the taper. However, Hogan of National Securities said that even if the total purchases were reduced, the central bank still has a long way to go to block the purchases. He estimates that the Fed’s balance sheet could grow by another $ 700 million.

Indeed, stocks often take time to respond to policy changes-a smooth voyage of a week does not mean that there is no storm ahead. Still, the latest stretches are a reason for encouragement for those who are worried that the first concrete signs of a withdrawn stimulus will be devastating to investors.

The S & P 500, like the high-tech Nasdaq 100, closed the fourth of six weeks. The broader benchmark is progressing at a pace of adding more than 2% in August, surpassing that amount for the third straight month. .. According to Instinet LLC’s Frank Cappelleri, S & P has recorded such consecutive profits only 13 times in the last 30 years.

At the Jackson Hall Policy Forum, Powell said the US economy has passed the “substantial further progress” test towards the central bank’s inflation target and has made “clear progress” in terms of the labor market. At the same time, he warned that the move to initiate the termination of the bond purchase program should not be interpreted as a sign that rate hikes will continue soon.

Cathy Jones, Chief Fixed Income Strategist at the Schwab Financial Research Center, said: “Mr. Powell succeeded in sending a message that the Fed could soon begin to taper off, perhaps as early as after the September FOMC meeting, but it’s still a dovish message that they will take the time. , The policy will remain accommodative until further progress, especially with regard to employment. ”

Meanwhile, investors are watching other developments, including Congressional progress on both infrastructure transactions and a $ 3.5 trillion budget resolution. Corporate America is also ending its historic earnings season, with rising rates of vaccination against Covid-19.

Randy Frederick, Managing Director of Trading and Derivatives at Charles Schwab Corporation, said: I think I’m in a really good position because of the taper, “he said. If anything, the market is concerned about inflation, which means investors can “welcome when a taper occurs,” he added.

Jerome Powell: Powell’s slave stock can be seen tapering without many tantrums Jerome Powell: Powell’s slave stock can be seen tapering without many tantrums

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