Jerome Powell Dances Around Rate Hike News. Stocks Are Up Today.

Advertisement

  • Jerome Powell delivered a speech today at a central banker conference, and stocks are on the move higher.
  • This speech evaded many questions investors had, with the Fed sticking to its rhetoric.
  • The market appears to be taking the view that less news is good news right now.
Jerome Powell - Jerome Powell Dances Around Rate Hike News. Stocks Are Up Today.

Source: Poetra.RH / Shutterstock.com

Stocks are having another decent day today, with most indices seeing modest gains this afternoon. These moves follow more “Fed speak” as Federal Reserve chairman Jerome Powell delivered a speech at a central banking forum today, discussing inflation.

Interestingly, much of this speech centered around the Fed’s role with respect to inflation and what the economy needs. The chairman did stop short of suggesting any sort of role or relationship when it comes to politics, focusing exclusively on measures that will help tame inflation.

When asked about climate change and fiscal policies that contribute to the inflation discussion, Jerome Powell stuck to his guns. He said that “restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy,” something which the market appears to be brushing off today.

Let’s dive into what investors may want to make of the Fed’s stance right now.

The Market Is on Jerome Powell Watch

If we’ve learned anything from 2022, it’s that Federal Reserve monetary policy matters for the stock market. How the Fed acts with respect to rate hikes is one thing. But how Jerome Powell and other central bankers talk — that can move markets even more aggressively.

Thus, today’s speech by Powell, which essentially culminated in the chairman dancing around any sort of certainty with respect to future rate hikes, is being viewed positively by investors. Some may think that we’re nearing the end of the hiking cycle. If there’s a pause in Q1 or Q2 of this year, that may be all that’s needed for another rally. And while rate cuts may be much further out on the horizon, that’s something that’s being priced into the bond market right now.

The reality is that our economy is one that’s best suited for a low interest rate environment. In order for asset prices to rise over the long term (and that includes stocks), the amount of debt in the economy will also need to rise. Low interest rates are what makes such a massive and debt-burdened machine work.

We’ll see what happens from here. But it appears Jerome Powell and other regional bank presidents don’t want to tip their hand. Maybe that’s a good thing.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2023/01/jerome-powell-dances-around-rate-hike-news-stocks-are-up-today/.

©2024 InvestorPlace Media, LLC