August 18, 2021

Markets continue to wait for "hawkish" rhetoric from Jerome Powell.

 US stock indices continue to break all imaginable and unimaginable records, and the markets continue to wait for Jerome Powell to change his rhetoric to a more "hawkish" one. The Fed will begin to curtail the quantitative stimulus program. Recall that, in general, the Federal Reserve continues to pour $ 120 billion into the American economy every month. Thus, most of this money continues to settle on the US stock market and some on the cryptocurrency market, whose capitalization has recently exceeded $ 2 trillion. However, what is good for the stock markets is bad for the national currency. After all, stock markets are growing now simply because there is more money in the economy. But the US dollar, although it has recently grown against both the pound and the euro, remains in the "risk zone" in the long term. Thus, the US dollar is waiting for the Fed to announce the end of the quantitative stimulus program, and only in this case can it receive long-term support. But stock indices, in this case, may experience some pressure over time. However, in the coming months, in any case, there is no question of completely stopping the injection of huge amounts of money into the economy. Therefore, the S&P 500, NASDAQ, and Dow Jones may well continue to grow until the end of this year.

As for Jerome Powell's speech, all market participants now need to clearly understand when the Fed will be ready to start curtailing the QE program. That is why a lot of attention will be focused on his every speech, and his every word will be examined under a microscope. However, Powell is unlikely to be frank with the markets tonight. Today, he will only answer questions within one of the virtual forums. But next week, an economic symposium will be held in Jackson Hole, and, according to many experts, there is a much greater chance that Powell will talk about the QE program at this event. According to most experts, we also recall that the Fed may announce the transition to the gradual completion of the QE program as early as September. Some experts expect this to happen in November or December. A lot will depend on how the macroeconomic data will be published in August and early September. In the United States, there is now a surge in the incidence of "coronavirus," and, for example, the consumer confidence index has fallen very much. In principle, any economic indicator can significantly deteriorate under the influence of a new "wave" of the pandemic. And this can have a very serious impact on the pace of recovery of the American economy.