Good morning contrarians! It is Thursday, July 28.
Markets staged a major rally yesterday. The cause for this was Jerome Powell saying the Fed was shifting to data dependency after achieving levels “broadly in line” with neutral interest rates.
“We are now at levels broadly in line with our estimates of neutral interest rates, and after front-loading our hiking cycle until now we will be much more data dependent going forward.”
Powell also said a bunch of stuff that could be construed as hawkish, but no matter. It did the trick and the Nasdaq gained 4% on the day with the S&P 500 gaining 2.6%.
The question now is whether we give back all these gains in short order. Morgan Stanley for its part is calling this set up a trap. If nothing else it does appear to have raised the stakes to where future rate hikes could really disappoint investors…
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