Risk assets rally on Powell Put

29 November, 2018

Investors were all ears for yesterday’s speech from Federal Reserve Chairman Jerome Powell at the Economic Club of New York. A couple of keywords were all that was needed to boost investor appetite that sent the Dow Jones Industrial Average 617 points higher - the strongest daily rally since March.

“Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy,” said Powell.

The term “just below” is clearly different from being “a long way from neutral” in a statement he made on October 3 when markets started falling from their peak and entered into a correction territory later that month. While it’s difficult to quantify neutral interest rates, the signal the markets got is a Fed turning dovish. While investors still believe that a December rate hike is a done deal, they now expect only one more to come in 2019 as opposed to three suggested by the Fed’s projections from September’s meeting.

Powell also believes that growth will remain solid with low unemployment and inflation near target. Such an environment accompanied by slower rate hikes should be supportive to risk, but given that markets are already pricing in a dovish Fed in 2019, we need to see improvement elsewhere to confirm that equity bulls are back in control.

The latest drop in Treasury bond yields was mainly attributed to the shift in the Fed’s outlook. This will lower the required rate of return for equity which is good news for stocks. However, if we see further drops from here, it suggests that markets are becoming more fearful of other factors, including escalating trade tensions, expectations of weaker global and domestic economic growth, slower corporate earnings growth, and geopolitical risks.

Now it’s up to Presidents Donald Trump and Xi Jinping to provide the next boost to the equities rally. A cease-fire over the weekend on the sidelines of the G20 summit to end Washington’s trade dispute with Beijing will provide much-needed support. However, it’s almost impossible to know what will go on in Trump’s mind when he meets his Chinese counterpart.


Source link  
Apple shares tumbled nearly 2%

Apple shares tumbled nearly 2% on Monday despite the company unveiling a series of new services at its campus in Cupertino, California. The technology giant...

Asia joins Friday's sell-off

The selloff in US and European stock markets from Friday has spread across Asia at the start of the new trading week, as concerns over the health...

Recovery of emerging markets

The recovery that emerging markets have managed to build throughout the first quarter of 2019 is set to extend further after the downbeat...


Will the old saying 'third time's a charm'?

The past trading week has overall been a grueling week of swings in either direction for the British Pound. In what's been a pivotal week for Brexit...

Pound at highest level since June 2018

It has been yet another dramatic 24 hours of swings both higher and lower for the British Pound as volatility continues in the lead up to the fast...

Brexit remains primary driver for Pound

What's it going to take to appease UK lawmakers on Brexit? Prime Minister Theresa May clearly hasn't been able to find a solution to that...


Pound climbs on 'improved' Brexit deal

The Pound has successfully managed to conclude a recent run of seven consecutive days of declines and has commenced the new trading week with...

Is the bull market under threat?

It has been a decade since the bull market started back in March 2009. If you dared to invest back then in the US's largest 500 companies, you would have earned...

ECB decision alerts Euro sellers

The EURUSD sank below the 1.13 only to pare back losses, after the European Central Bank confirmed reports and decided to offer cheap loans to banks...


In the past 24 hours Bitcoin has lost -1.74% and reached $3951.12928295. Open your trading account with the best cryptocurrency brokers on special terms today.

In the past 7 days the EUR/USD pair has lost -0.4259% and is now at $1.1296. Start trading and making money on Forex today.

In the past 7 days Ethereum has lost -4.23% and is now at $134.165771372. Have the most popular cryptocurrencies compared online 24/7.


Top Brokers offering Forex Market Analysis



Forex Currencies Forecasts



Top 10 Forex Brokers 2019

# Broker Review
1easyMarketseasyMarkets91%
2FXTMFXTM89%
3HYCMHYCM88%
4FxProFxPro86%
5FIBO GroupFIBO Group85%
6OctaFXOctaFX84%
7HotForexHotForex81%
8FXCMFXCM78%
9AlpariAlpari76%
10XMXM74%
  


Share: