Jerome Powell: 'Time Has Come' For Interest Rate Cuts, Cooling In Labor Market 'Unmistakable'
Portfolio Pulse from Piero Cingari
Federal Reserve Chair Jerome Powell indicated that interest rate cuts are on the horizon, as inflation appears to be on a sustainable path back to 2%. Powell emphasized that the timing and pace of rate cuts will depend on incoming data. The labor market is cooling, with job gains decelerating and unemployment rising due to an increased supply of workers. Market reactions included a rise in Treasury bond prices, a drop in the dollar, and increases in gold and stock prices.
August 23, 2024 | 2:27 pm
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POSITIVE IMPACT
The SPDR Gold Trust (GLD) increased by over 1% as the dollar weakened following Powell's speech, making gold more attractive as a safe-haven asset.
A weaker dollar makes gold more attractive, leading to an increase in GLD's price as investors seek safe-haven assets amid potential rate cuts.
CONFIDENCE 85
IMPORTANCE 60
RELEVANCE 70
POSITIVE IMPACT
The iShares Russell 2000 ETF (IWM) surged by 2.2% as small-cap stocks rallied on the prospect of interest rate cuts, which could boost economic activity.
Small-cap stocks, represented by IWM, often benefit from lower interest rates due to their higher sensitivity to domestic economic conditions, leading to a significant rise.
CONFIDENCE 85
IMPORTANCE 60
RELEVANCE 70
POSITIVE IMPACT
The SPDR S&P 500 ETF Trust (SPY) rose by 1% as stocks gained following Powell's indication of potential interest rate cuts, which are generally favorable for equities.
Interest rate cuts are typically positive for stocks, as they lower borrowing costs and can stimulate economic growth, leading to a rise in SPY.
CONFIDENCE 90
IMPORTANCE 65
RELEVANCE 75
POSITIVE IMPACT
The iShares 20+ Year Treasury Bond ETF (TLT) rose by 0.8% following Powell's speech, as Treasury yields tumbled in anticipation of potential interest rate cuts.
Powell's indication of potential interest rate cuts led to a decrease in Treasury yields, which typically results in higher bond prices, benefiting TLT.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80