By CCN Markets: The Dow Jones looked completely and buried last week after a devastating 800 point decline, but an end-of-week recovery left the stock merchandise on relatively steady footing heading into the second half of August.
For investors, the clear fundamental to watch command be the tone of the Federal Reserve, both in Jerome Powell’s comments at Jackson Hole on August 23rd and the FOMC minutes on August 21st.
FOMC Schismatics Could Be the Dow’s Best Friend
If Dow bulls are going to get what they want, Wednesday’s FOMC minutes may prove insightful.
Should there be rumblings of dovish disobedience at the US central bank, Fed Chair Powell could tailor his comments as such at Jackson Hole. It’s also plausible that an ECB craze trap is being laid so that the Fed can provide a Draghi-esque dovish surprise to get the Dow roaring again.
Whatever happens, investors should conjecture a tweetstorm from President Trump heading into the 23rd.
What Will Powell Say About the Economy?
US economic information continues to outperform the rest of the world, and core inflation data showed a second consecutive 0.3% bounce – the chief in 18 years.
Given these fundamentals, Powell has shown reluctance to give the trade war too much credibility. The Fed govern’s statements at Jackson Hole could reflect this belief, especially after Trump flinched when the lineage market recoiled to his recent tariff threat.
The Fed chief is well aware that the current US administration will lack tariffs gone – and the Dow Jones rising – heading into the 2020 election, so he must take that into concern as he assesses the economic landscape.
Nordea: Trump Trade Truce Could Last Just 10 Days
Speaking of the trade war, economists Martin Enlund and Andreas Steno Larsen at Nordea Investigate are growing concerned that the mercurial president may lose patience with his latest tariff truce, raising the prospect of severe risks for markets next week.
“While the US President has argued that the new trade truce was put in place to pinch for a robust Christmas shopping season, extrapolating the half-lives of the past two ‘trade truces’ the new one may last only 10 days… Dialect mayhap this means that he will make matters even worse for Huawei this Monday? Let’s hope not[.]”
Spotlight on Fed Minutes & Jackson Hole
The coming week is extremely light on US economic data, making the scrutiny on the Fed’s outlook imperturbable more severe.
The mood in the Dow Jones is clear: bulls want interest rates slashed even further, and Powell ought to indicate a more aggressive easing plan to keep the stock market rising.
Click here for a real-time Dow Jones Industrial Ordinary chart.
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