Stocks Go From Sacred Cow To Sacrificial Lamb
If Neel Kashkari was "actually happy" to see US equities fall following Jerome Powell's terse remarks in Jackson Hole late last month, he must be elated now.
In six trading days since Powell's address, the S&P managed just a single session of gains (figure below).
Friday likely would've been a decent session, with equities bolstered by a Goldilocks jobs report, but news that Russia isn't restarting the Nord Stream following three days of "maintenance" undercut risk sentiment.
Stocks are
It isn’t just stocks it’s all risky assets under the gun…
Real Estate has been shown to provide a much broader and more significant wealth effect than stocks…and, given their recent market dynamics also must be considered risky assets. Quite possibly more important to the Fed than stocks – and also certainly under the gun…
Yeah, I mean that’s the thing: They’ve already delivered a pretty significant blow to the housing market and arguably, the ball is already rolling for an even deeper downturn there. Stocks, on the other hand, are proving to be a bit more resilient. Note that US equities were only down ~11% or so from record highs after the summer rally. That’s a disaster if you’re the Fed in these circumstances. There was a pretty strong argument that stocks “needed” to fall 40% considering inflation realities. I didn’t think that was likely, and I still don’t, but the argument was out there. So, I think they’re pretty pleased with what they’ve been able to accomplish with housing so far. Equities, not so much.
lot of BTFD muscle memory to atrophy still given generation of TINA monetary morphine fuel…my $.03 worth sees further equity declines in anticipation of Fed meeting, … then my hopes lie with 50 bps increase for some stabilization effort with Fed becoming “the adults in the room.” Another 75 bps could trigger the market panic we’ve been wondering about these last several months…stay tuned…