Here’s what Fed Chair Jerome Powell’s remarks mean for the market

on Nov 30, 2022
  • Fed Chair Powell reiterates that smaller rate hikes are coming soon.
  • Pro explains what it means for the equities market on CNBC.
  • S&P 500 jumped roughly 3.0% on Chair Jerome Powell's remarks.

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S&P 500 just shot up more than 3.0% versus its intraday low after Fed Chair Jerome Powell reiterated that smaller rates hikes could start from December.

Summary of Chair Powell’s remarks

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But he still made some comments that weren’t that rosy. Here’s a summary of what Chair Powell said today:

  • There’s a long way to go to restore price stability
  • Monetary policy will remain restrictive for a while
  • Terminal rate will be higher than previously expected
  • Supply chain issues are showing signs of easing
  • Labour market despite some improvement, remains tight

Also on Wednesday, the Bureau of Economic Analysis reported an annualised gain of 2.90% in third-quarter GDP. Powell added:

I do continue to believe that there’s a path to soft-ish landing. If you look at the history, it’s not a likely outcome but this is a different set of circumstances. I think it’s very plausible; it’s still achievable.

Could it be the start of a new bull market?

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Fed Chair expects PCE inflation to come in at 6.0% for October versus 6.2% in the prior month.

That was another positive which pushed the benchmark index above its 200-day Moving Average – a breakout that’s usually construed as a bullish signal. Still, Bill Smead of Smead Capital Management continues to recommend caution. On CNBC’s “Powe Lunch”, he said:

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There are a lot of rallies in bear markets. By looking at the abrupt rally in the most decimated tech stocks, that looks a lot like a bear market rally.

Importantly, the CBOE Volatility Index stands at just over “20” at writing. The previous four times this year, such a reading was followed by a sharp sell-off as Josh Brown explained a day earlier (read more).

In his address, Chair Powell also said that housing inflation could continue next year. Still, Smead is sticking to his constructive view on “homebuilders”.

[Powell] said we have a shortage of houses and we want to own a business that meets an economic need. He talked about how much prices went up last year. That was a temporary price bubble, not a building bubble. There’s a bright future for these companies.


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