A lot happened this week in the stock market. Big earnings, the S&P 500’s quarterly rebalance… And as Joy of the Trade’s Jeff Zananiri and I sat down to film this, Federal Reserve Chair Jerome Powell was addressing the press to discuss interest rates and monetary policy. 

We need to know what’s going on between Powell’s speech and the stock market. It’s going to affect a lot of things, especially with inflation rising while interest rates remain near zero.

We’ve seen a breakdown in almost everything except for bond yields, which are rising… And that pushes the market down — like we saw in the recent Nasdaq dips.

On Tuesday, both the retail sales and industrial production reports came out… and they were dismal. Ahead of Powell’s speech, both inflation and bond yields are all climbing.

In our mind, the stock market is throwing a tantrum right now.

The U.S. economy is so intertwined with the stock market that when the market crashes, our economy usually follows suit. The Fed can’t allow that to happen, so the market is going to keep throwing these fits until it gets what it wants: manufactured low rates to sustain these super market returns.

Powell’s Speech and the Stock Market: What To Look for

I believe the only alternative to manufacturing low rates is an economy that can keep the stock market bullish on its own. 

A $1.9 trillion stimulus package that lets people buy food isn’t enough to get us there. We need people working and earning just as much, if not more than before just to keep up with inflation. 

A key level we’re looking at is the 10-year Treasury yield. Right now, we’re at 1.67%…

If we get above 1.70%, we could see the wheels come off.

What we don’t like about Powell’s speeches and the stock market is how the Fed telegraphs everything it plans to do… Which is nothing for the next couple years.

But there’s a certain level that yields might hit before the Fed must take action…

Check out the video below to hear us talk about Powell’s speech and the stock market, real estate and how we plan to trade it.

And as always, don’t forget to subscribe to my YouTube channel if you haven’t already so you can be notified as soon as I post my next video! 

 

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