August 25, 2023, 12:10 pm EDT
Inflation Talk Remained
Jerome Powell, the Chairman of the Fed Reserve, kept talking about inflation pressure in Jackson Hole today. Indeed, the inflation threat reduced significantly compared to last year (CPI down from 8.5% to 3.2%) but it is still away from the target of 2%.
Therefore, we should expect the Fed fund rate to keep tight before losing up for months ahead.
As we mentioned strong job markets and housing markets made inflation stubborn. Unless there is a pullback in these markets, the inflation issue should be here to stay.
The consequence of this condition for the stock market is the cooldown of fast movers in technology mega stocks and the retreat of home builders and retailer stocks.
During this type of market, market participants should stay cautious and avoid high achievers. Only a few undervalued stocks may rise during this type of market. Thus, we expect the next few months to be a cooling period after the overheated run in 2023.