📈Jerome Powell Pivot Rallies Market

The indexes rallied significantly today on Jerome Powell speech at the Brookings Institute. His statement “it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down the time for moderating the pace of rate increases may come as soon as the December meeting.“ That one statement was enough to move the markets. It alludes that the Fed is only going to raise 50 basis points in December. The slowing down of rate hikes is being construed as a pivot. A true pivot is when they cut interest rate after raising them but the first sign is usually when the equity markets respond. At the end of 1994 Alan Greenspan raised rates and this led to a large rally. The rally was based upon his comment that he would be lessening in the rate hikes. Within seven months he was cutting interest rates. This led to a massive multiyear rally. Now we did not have the kind of inflation we have now but we do have some similarities which I will cover shortly. We are more similar to 1980-81 when the CPI was over the 10 year treasury. We must stay vigilant. Tomorrow for PCE comes out which is what the Fed respects more than CPI. We need to see how we respond to that number. Technically we are over the 200 day moving average on the S&P500 and the Russell 2000. We had broad-based buying in every single sector. We saw a massive short covering in the technology sector. When you start a decline in a rising rate environment financial companies (XLF) tend to benefit the most. I go over today’s development In the video below.  Specifically what stocks to watch tomorrow.

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