JPow unlikely to rock the boat at JHole

Local market had a choppy flat day as global markets wait for Jackson Hole (aka JHole) symposium update. We are finishing this week with 2 negative days after starting it with 3 positive days. Size continues to matter as Large Caps were the best while Small Caps were the worst. Industrials and Utilities were the best sectors while Retail and Tech were the worst.

It is all about Jackson Hole symposium tonight and the Fed president talkers are going to be coming out on an hourly basis. They unleashed a few non voting relative hawkish presidents yesterday to send the market that they are serious about tapering while today will be all about walking backwards with no specific details on when, how and even if we are going to taper. It is important to know that they will change voting presidents every year and next year’s line up are much more hawkish than the current one. Given that Jerome Powell (aka JPow) has been working towards getting another term as US Fed chair. He has even got Janet Yellen on his side. It makes no sense for JPow to rock the boat with tapering ahead of his job extension. 

We do not think JPow wants to taper and it looks even less likely with negative growth sentiments in play and voting group at US Fed remains fractured between massive doves and slight doves. JPow unlikely to rock the boat at JHole!

The world is addicted to stimulus and continue to find new ways to add more. Most major western developed nations have gone so far into stimulus that they can’t stop. Japan was the early adaptor and recently EU joined them. US remains on the precipice from rolling over into economic mess. The asset bubbles have grown too far under debt bubble and now being held together by massive government handouts. Despite asset bubbles at historic high prices, US Fed is mainly targeting stimulus to boost them even higher. Pandemic related supply side issues and historic stimulus driven asset prices are driving historic inflation burst. US Fed is not feeding a bubble at historic proportion while majority of the economy is barely surviving. US has been able to hold it together with food stamps and freezing rents and student loans. We are seeing rent freeze being over turned at the courts. These type of legal challenges are inevitable when government intervenes in property market made worse by US Fed stimulus.

Brokers are jumping over each other to downgrade Australian economic growth outlook. We all know that Q3 is going to be a dive lower but Q4 remains challenging to say the least. The most optimistic outlook suggest normality returning in Nov/Dec while any supply issues or worsening cluster will delay those plans. We still do not have a pathway to vaccinate under 12 kids and we have limited understanding of long covid effects. We are yet to cover the key risk groups like aged care, disability, first nation, health care workers etc. Global trend suggest that vaccination rates start to slow after 50-60%. If we are to learn from Israel, the pathway forward has more question than answers after the mistakes done as multiple levels of government. We are betting on substantially elevated vaccination rates being maintained with supply to make current time line. It may be different this time!

You can view the full Sunset Strip report, with charts and the end of day market stats, on the following link.

(VIEW LINK)