The latest weekly Synthetic Systems.
Fed chair Jay Powell lowered the boom on the stock market at Jackson Hole last Friday, slicing 1000 points off the Dow Jones Industrials. I can’t recall a more unambiguously hawkish speech from a Fed chair. Powell not only quoted Volcker three times but echoed Dragi’s “do what it takes…”, for all intents and purposes saying aggressive rate hikes will continue until the markets have been beaten into submission.
This Monday Wall Street is treating it as if it was all just a bad dream. Stocks are down as of this writing, but only modestly so. This will not be sufficient to satisfy the FOMC’s determination to tighten “financial conditions”. Expect more hawkish commentary from Fed officials over the coming days. If that’s still not enough, the FOMC will go nuclear at its next meeting September 21.
Synthetic Systems by the way knows nothing about this. So it’s interesting that it nevertheless has penciled in a dramatic market inflection for that time frame.