Understanding Powell's Speech and its Effect on the Market | Episode 061 | 10-19-23

In this episode of "Markets with Megan" by Verdence Capital Advisors, Megan provides a comprehensive update on a busy day in the world of economic data. She starts with insights into the labor market, where initial jobless claims fell below 200,000 last week. Megan then discusses the much-anticipated speech from Federal Reserve Chairman Jerome Powell at the Economic Club of New York, which shed light on the Fed's stance on interest rates. She talks about how this has influenced the market and suggests that we should not expect a rate cut anytime soon. 

Hello, this is Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors, coming to you today with their regular segment of Markets with Megan. It's been a busy day today from an economic data standpoint. We got some information on the labor market where initial jobless claims fell below $200,000 last week. We just want to remind people that there is some kind of distortions in that data given the Columbus Day holiday weekend, but this is still strong indication from the labor market.

This was followed up by a much anticipated speech from Federal Reserve Chairman Jerome Powell at the Economic Club of New York. We wanted to get some indication on what he was thinking with interest rates. We haven't really heard him speak since the events in the Middle East and what we're seeing with oil prices. Basically, he left the door open for either way. In the speech there was a little bit for those people that think he's going to pause indefinitely and he's done with his tightening cycle, but then he did leave that door open for those that believe he has one more rate hike in him. He did highlight some of the geopolitical events and how that is a major risk, but he's also highlighted that the labor market remains very strong and that there may be the need for them to take restricted policy again. He kept the door open for there to be additional rate hikes. We still think that they're on the table, especially with the recent increase we've been seeing in commodity prices and how that will filter into inflation.

What we saw in the market was the 10-year Treasury has been the biggest mover on the day. Equities are relatively flat, but the interest rate market is moving rapidly. We have the 10-year Treasury at a 4.96%. It's approaching 5%. It's looking like it wants to get there and break through that. This is all on the anticipation that some of these inflation indicators are going to be trouble for the Fed to get down and that they may have to raise rates at least one more time. Don't expect any rate cuts anytime soon. That's all we have today. If you have any questions or comments, please feel free to reach out to podcast at Verdence dot com. Thank you.