The Fed Just Changed Everything: What To Do Now
In a Nutshell
Fed Chair Kevin Warsh signaled rates may need to rise further as inflation stays above the 2% target, yet markets rallied anyway, adding $500B to equities in the final 40 minutes of his speech. Probability of a September hike now sits at ~59%, but the Nasdaq still pushed to fresh highs despite the hawkish tone. Selective entries, no leverage, and holding cash when unsure are the recommended tactics while support near 715 remains intact.
These notes were generated by AI and may contain inaccuracies.
Markets reacted sharply to data already known, with the only change being Federal Reserve head Kevin Warsh solidifying the information during his Jackson Hole speech. The Nasdaq tested daily lows at 716 before climbing as Warsh began speaking, despite his comments containing no bullish content and highlighting existing market concerns.
Inflation is better but remains sticky, with the Fed maintaining its 2% inflation target. The economy shows strength through solid spending, stable jobs, and rising investment. Warsh indicated rates may not be high enough yet, signaling potential for a rate hike since inflation continues moving away from the 2% target. Most Fed officials preferred waiting before changing rates.
Despite the hawkish tone, Warsh refused to pre-commit to a September rate hike, stating he is committed to discipline rather than a specific decision. This non-committal approach led to an inverse reversal where $500 billion was added back to US stocks in the last 40 minutes as his speech concluded. Warsh is described as optimistic about forming a task force to handle the situation.
The Fed rate monitor tool shows a 58.9% probability that the Federal Reserve will raise rates at its next meeting in 2 weeks and 5 days. Rate increases make borrowing more expensive for individuals and businesses, thereby slowing economic activity. Markets pushed to daily highs of 724 on QQQ despite no new bullish announcements.
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