Following a 9.1 percent gain in the month of July, the S&P 500 index fell 5.8 percent in the last four days of August following Federal Reserve Chairman Jerome Powell’s speech at Jackson Hole, WY. For the month of August, the S&P declined 4.2 percent.
While we have been especially critical of the Powell-led Fed previously stating that “people who speculate on a radical, untested theory that has a damaging effect on the markets and the economy should not be in charge of monetary policy,” apparently, we were not harsh enough. To be blunt, the Powell-Fed has embarrassed itself.
The same people who ignored rising inflation and kept interest rates at zero until inflation hit nearly 8 percent are now lecturing us about the importance of low inflation. Powell, who four weeks ago said “now that [interest rates] are at neutral” – the theoretical level that is neither accommodative nor restrictive – recently did a 180-degree turn saying “another unusually large increase [in rates] could be appropriate at our next meeting.”
After the 1008 point decline in the Dow Jones Industrial Average on August 26, 2022, the day Powell gave his speech, Minneapolis Fed President Neel Kashkari said he was “happy.”
The yield on the 10-year Treasury Note rose from 2.60 percent in early August to nearly 3.25 percent at month end. Oil, meanwhile, was trading at roughly $87 a barrel, down from the mid-$90s in July.