All sectors and major indices are moving into the green after Powell indicated a dovish stance, this morning, during his Jackson Hole speech.

Powell at Jackson Hole

 

All the pieces I read said Powell was going to come in hawkish and take this last chance in the old west to take shots at Trump, focus on Fed independence and rescue the damsel in distress: Fed Governor Cook.

Fed Policy Now

The shifting balance of risks may warrant adjusting our policy stance.

Instead, Powell tilted his hand towards a potential rate cut in September.

Fed Policy Longer-Term

It appears highly likely that if the economy experiences even a mild downturn, our policy rate would be back at the ELB very quickly, probably for another extended period.

I was even more intrigued with his comments on returning to a post great financial crisis policy stance if the economy experiences even a mild downturn.

The big deal is the potential for a series of rate cuts, which would be a boon for the market and economy.

The folks that hate this speech the most also have deep disdain for President Trump, and his unorthodox policies and mannerism.  They hate this rally.

It should be noted the Fed deleted, "the Committee seeks to achieve inflation that averages 2% over time,” which could potentially indicate a paradigm shift.

Valuations

I get that traditional valuations appear to be off the chain, but as a stock picker, I can tell you the guardrails mean never having grand slams in your portfolio.

This was a moment of truth for the rally after five straight down days. The S&P 500 rested the short term trendline and bounced like a coiled spring.

There is an even more impressive move in the Russell 2000, as an accommodative Fed is the ultimate elixir for long ailing small caps.

There is some irony about bottom fishing small caps based on the notion of being cheap.

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