It didn't take the news-reading algos long to find what they were looking for in Jerome Powell's speech yesterday. And to his credit, the Fed Chairman didn't make it difficult for either the computers or mere mortal analysts to understand what he was trying to communicate.
The bottom line here is simple. Powell & Co. do not have a preset path for future rate hikes and will be "data dependent" going forward. In other words, the fear that the Fed becoming stubborn, going too far, and hurting the economy in the process (the way they have in years past) is off the table. 'Nuf said.
To the stock market, this meant that one of the three big worries has been removed.
Traders - and their computers - noticed. Within 12 minutes of the release of Mr. Powell's speech, the S&P 500 surged 30 points. And by the end of the day, the trend-following algos had tacked on another 30+ points, putting the gain on the day at 61.62 points or 2.30%. For those that prefer the really big numbers, the Dow put up a gain of 617 points. Not bad. Not bad at all.
I've been telling my advisor firm clients for some time now that there were a couple phrases that could turn the recent stock market correction around. First, I opined that if the Fed were to subtly signal that it would be "data dependent" in 2019, traders would breathe easier. And second, I suggested that stocks would certainly celebrate if the market got wind of a trade deal with China.
First things first. The Fed Chairman said clearly that his gang of central bankers would indeed be "data dependent." Well, he actually said the following: "We will be paying very close attention to what incoming ...