With seven little words, Fed Chair Powell unleashed some chaos today as he confirmed "time has come for policy to adjust" and rate-cut expectations adjusted dovishly (though we note they were pretty much fully priced for this after the Minutes).
September rate-cut expectations rose to 32bps (so around a 1/3rd chance of 50bps, 2/3 chance of 25bps)...
Source: Bloomberg
2024 rate-cut expectations lifted to 104bps (just over 4 full cuts - well above the single-cut according to The Fed's Dot-Plot) and 213bps thru the end of 2025...
Source: Bloomberg
Gold, bonds, and stocks rallied while the dollar tumbled...
Source: Bloomberg
The instant bid in stocks only really held in Small Caps...
...thanks to a huge short-squeeze...
Source: Bloomberg
The dollar crashed to 2024 lows...
Source: Bloomberg
Treasury yields tumbled, led by the short-end today (2Y -10bps, 30Y -2bps) and down 14bps on the week...
Source: Bloomberg
The 2Y yield snapped back below 4.00% and the curve (2s30s) pushed notably steeper...
Source: Bloomberg
Bitcoin blasted off on the Powell headlines, setting the scene for the big short-squeeze we have discussed and testing $64,000...
Source: Bloomberg
Crude oil prices also surged, bouncing further off those early August lows...
Source: Bloomberg
Finally, we note that five of the six Powell Jackson Hole speeches saw the S&P 500 drop 7.5% on average in the next three months...
Source: Bloomberg
...and The Fed will begin cutting rates with the MSCI All-World Stocks Index at an all-time record high!!!
So brace!