Talk about a buzzkill.

The market had a big day yesterday as investors looked ahead to this morning’s speech from Federal Reserve Chair Jerome Powell at the annual Economic Policy Symposium in Jackson Hole, Wyoming. The hope was that we would hear good news about possibly slowing down or even ending interest rate cuts in the near future.

One look at the market today is all you need to know that didn’t happen.

I didn’t expect all sweetness and light, but I – and the entire stock market – was surprised at just how “hawkish” the language was. Powell said the Fed is not yet convinced that inflation has peaked, even though the core rate has been falling since March, and he made it clear that the Fed will aggressively fight inflation no matter how long it takes.

“Restoring price stability will likely require maintaining a restrictive policy stance for some time,” Powell said. “The historical record cautions strongly against prematurely loosening policy.”

As you probably know, I’ve been firmly in the camp that the Fed would either end rate hikes at its September meeting, or at least shift to a more data-dependent “neutral” policy stance. I have also expected that to fuel a big rally into the end of the year.

Okay, so now what?

There is no Fed policy meeting in August. The next chance for a rate hike will come at the policy meeting that ends September 21. The market is pricing in a 100% chance of another increase. The only question is whether it will be 50 basis points (43.5% chance according to the market) or 75 basis points (56.5% chance).

Source: CME FedWatch Tool

I leaned toward a 75-basis point increase as perhaps the final blow against inflation, but Powell threw more uncertainty into that today. On the one hand, he said the Fed must “keep at it until the job is done.” On the other hand, he said the Fed wants to act with resolve right now, implying he wants to end rate hikes sooner than later.

The schedule also factors in this. The next Fed meeting after September doesn’t come until November 1-2. Election Day this year is November 8, and the Fed never raises rates that close to an election. I would be extremely surprised if they were to buck tradition this year.

That leaves December 13-14 as the last meeting of the year. If inflation has continued to ease, the Fed may not need to raise again at that point. But even if they do, there is a good chance the central bank can shift to that neutral policy stance and let data drive the decisions from meeting to meeting.

That data is trending in the right direction. Inflation appears to have peaked, and future increases will get harder to come by as we begin to “lap” last year’s high readings.

Energy prices should also calm down in the milder autumn weather, continuing the relief we have already seen at the gas pump.

Ironically, the Fed’s favorite measure of inflation – the personal consumption expenditures price index – was released this morning before Powell spoke, and it showed inflation eased in July.

Inflation is not gone, and it won’t be gone for a long time. But consumers are still spending, even if more selectively, and the job market remains healthy. If inflation continues to cool down, the market should again look ahead to the end of rate increases.

My outlook hasn’t changed, though the market will not like the additional uncertainty. I expect a rally in the market to end a rough 2022. But I also expect the market to narrow in what is still a challenging economy. In a narrower market, money will chase fewer stocks, and institutional and individual investors alike will renew their focus on stocks with superior fundamentals and positive earnings outlooks.

We are already seeing Wall Street analysts become more cautious with their expectations for 2022 and 2023 due to the slowing economy. My favorite economist, Ed Yardeni, noted that the only S&P 500 sectors the analyst community has not slashed earnings estimates on are Energy, Real Estate and Utilities.

Consumer Staples, Financials and Industrials earnings estimates have stalled, while earnings estimates have been revised lower for Communication Services, Consumer Discretionary, Health Care, Information Technology and Materials. This is not a good sign for a lot of companies, but it is for fundamentally superior companies. They separate themselves from the pack and buying pressure increases as massive amounts of cash flow back into the market.

Those are the kinds of companies I recommend in Growth Investor. In fact, the analyst community remains positive on the bulk of my Buy List stocks. The average consensus earnings estimate has been revised 21.1% higher in the past three months. I should also add that our Buy List stocks posted 62.3% average annual sales growth and 455.7% average annual earnings growth in the second-quarter earnings season.

The fact of the matter is my Growth Investor stocks clearly represent the crème de la crème, and as such, they benefited immensely from the recent flight to quality. In fact, my Growth Investor stocks just posted their biggest monthly gain since April 2020, beating the S&P 500 by nearly three-to-one.

If you want to ensure that your portfolio is positioned to benefit from this flight to quality, sign up for Growth Investor today. And you really couldn’t pick a better time to join, as I am adding four stocks – food, crude oil and natural gas stocks that continue to boast the best earnings and sales growth going forward – in today’s Growth Investor Monthly Issue for September. The Monthly Issue will be released shortly, so I encourage you to sign up now so you can read it while it’s still hot off the presses.

Click here to become a member of Growth Investor today.

Sincerely,

Louis Navellier

P.S. There is a great divide opening up in America – and investing in my Growth Investor stocks will help get you on the right side of it. On one side is a new aristocracy that’s amassing more wealth more quickly than any other group in American history. For people like me, the one percent, life has never been better, more prosperous.

On the other side, the opposite is happening. Wealth is flowing out of the pockets of ordinary Americans at an unprecedented rate.

What’s happening is only going to gather in strength over the coming decades. It certainly won’t weaken.

Few Americans even know that any of this is going on. I’ve never seen anyone from my side of the chasm step forward to explain any of these things.

It’s why I put together this video. In it, I’ll lay out exactly what is happening, including several key steps every American should take right now.