InvestorQ : How do you see the stock market action on Monday 29th August 2022? Do you see a negative reaction to Powell’s Jackson Hole speech?
Arusha Ray made post

How do you see the stock market action on Monday 29th August 2022? Do you see a negative reaction to Powell’s Jackson Hole speech?

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diksha shah answered.
2 months ago
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Speaking at the Jackson Hole symposium, the tone of Jerome Powell betrayed a lot of hawkishness. He has already insisted in his 8-minute speech that the Fed would not relent on rate hikes till the consumer inflation came closer to 2%. The immediate interpretation is that 75 bps rate hike is inevitable in September, with rates at over 3.50% by year end.

The opening is likely to be weak, and there is no rocket science to it. That is something that is already evident in the deep negative show by the US and Asian markets and the weak trading in the SGX Nifty. However, it remains to be seen how the markets would react in the long term to the Fed cues and that is where traders must take a more nuanced approach.

FPIs sold Rs.51 crore of equities on Friday even as domestic funds and LIC bought stocks worth Rs.454 crore. Most FPIs were cautious ahead of the Powell address. In response to Powell’s hawkishness, Dow closed 1,008 points lower and NASDAQ 498 points lower on Friday. Europe was negative as SGX Nifty is down 210 bps in early trades.

The million dollar question is how to approach stocks on Monday. Avoid buying the chaos and wait for markets to stabilize. Try and capitalize on the weak start after the markets are stable. The impact is more sentimental because terminal target rates don’t change. Impact of Powell hawkishness on the RBI is likely to be limited as it would still target terminal rates of interest of 6.25%-6.50%. Fears are overhyped, and one can start look at buying lower.

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