The Dow Jones and S&P 500 Index moved back toward record highs this week, as investors appeared to celebrate Fed Powell’s announcement at Jackson Hall that interest rate cuts would soon be coming. The gains were also broad-based, with small-caps outperforming large-caps and an equal-weighted version of the S&P 500 Index outpacing its capitalization-weighted counterpart. However, trading activity was exceptionally light through most of the week. On Friday, stocks jumped at the open of trading following the release of the text of Powell's speech at Jackson Hole, in which he acknowledged that “the time has come for policy to adjust”—implying that policymakers would cut rates in September. Moreover, Powell appeared to leave room for a cut of 50 basis (instead of 25 basis points). The release of minutes from the Fed’s previous policy meeting earlier in the week also seemed to bolster sentiment. On the macro side, one notable surprise came in the Labor Department’s annual revision of its nonfarm payroll count (through March), which showed 818,000 fewer jobs added over the previous 12 months than originally reported. On Friday, US Treasury yields tumbled, led by the short-end (2Y -10bps, 30Y -2bps). Yields are down 14bps on the week. Bitcoin recorded strong gains on the Powell headlines and tested $64k. In Europe, the European STOXX Europe 600 Index ended 1.31% higher amid growing hopes that the Fed and the European Central Bank (ECB) would cut interest rates next month. Gold and oil rallied as well.
Have a great week-end
Charles for the team