Jerome Powell delivered an unusually brief and stern message to the markets in his annual Jackson Hole speech. The following paraphrase of the speech covers the key points. For those interested, I have provided a link to the full 8:33 statement.
Today my focus is narrower… my message more direct… the overarching focus of the Fed is to get inflation back down to 2%… this will require using our tools forcefully.
In reaction to Powell’s words, the S&P 500 (NYSE:SPY) fell 3.38% and the Nasdaq 100 (NASDAQ:QQQ) fell over 4% on Friday. Given such a violent reaction, the question becomes where do we go from here?
Primary Trend
The stock market has been in a confirmed primary downtrend since my March market outlook report, “SPY: The death cross and what you need to know,“ and is now in month eight of a bear market. Given the violent reaction to the Fed’s Jackson Hole comments, it is timely to review what may or may not be priced into various segments of the market today.
For example, which segments of the market are more likely to be at risk of higher interest rates? Conversely, which segments of the market are less at risk having already priced in higher rates? Given the advanced nature of the downtrend in many sectors of the market, the above questions hold the key to answering the primary question: where do we go from here?
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