ETF Tracker StatSheet
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WALL STREET CELEBRATES POWELL’S AMBIGUOUS RATE CUT SIGNAL
- Moving the market
The major indexes surged higher following Fed Chair Powell’s commentary, which hinted at upcoming interest rate cuts.
Although Powell was vague about the specifics, his statement that “the time has come for policy to adjust” resonated strongly, despite his caution that “the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
In essence, Powell left his options open, but traders focused on the potential for lower rates, propelling the markets upward. Tech stocks, which stand to benefit from lower rates, led the charge with Nvidia and Tesla both jumping 4%, while Small Caps followed closely behind.
While Powell’s comments were anticipated, the excitement on Wall Street was palpable, as hopes for lower rates seemed to be realized. However, few consider that a rate cut is more about supporting a struggling economy than a significant improvement in inflation. This policy shift could fuel further inflation, a consequence that might later be seen as inevitable.
ZeroHedge took it a step further, suggesting that ending the Fed’s tightening cycle with stocks at all-time highs is unprecedented. They argued that unless the current expansion ends in a severe recession, the S&P 500 could enter a bubble, which might burst spectacularly, forcing the Fed to revert to zero or even negative interest rates and resume quantitative easing.
For now, however, Wall Street celebrated another winning session, with equities soaring and rate-cut expectations rising. A short squeeze added to the upward momentum, while the dollar fell to 2024 lows, and bond yields plunged. Bitcoin surged towards the $64k mark, with gold and crude oil also climbing.
Enthusiasm dominated the day, but can it sustain the markets?
Historically, five of Powell’s six Jackson Hole speeches have been followed by an average 7.5% drop in the S&P 500 over the next three months.
Will this time be different?
2. Current “Buy” Cycles (effective 11/21/2023)
Our Trend Tracking Indexes (TTIs) have both crossed their trend lines with enough strength to trigger new “Buy” signals. That means, Tuesday, 11/21/2023, was the official date for these signals.
If you want to follow our strategy, you should first decide how much you want to invest based on your risk tolerance (percentage of allocation). Then, you should check my Thursday StatSheet and Saturday’s “ETFs on the Cutline” report for suitable ETFs to buy.
3. Trend Tracking Indexes (TTIs)
The much-anticipated speech by Jerome Powell following the Jackson Hole symposium had a notably positive impact on the markets. The key phrase, “Fed policy adjustment,” resonated strongly, driving market indices higher.
This optimistic outlook also benefited our TTIs, which saw gains exceeding 1%.
This is how we closed 08/23/2024:
Domestic TTI: +7.54% above its M/A (prior close +6.68%)—Buy signal effective 11/21/2023.
International TTI: +7.50% above its M/A (prior close +6.61%)—Buy signal effective 11/21/2023.
All linked charts above are courtesy of Bloomberg via ZeroHedge.
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