Stock Bulls Are Now Free to Fight the Federal Reserve
Chair Jerome Powell had the opportunity to put the market in its place. His demurral may just signal an all-clear for equities.
Did Jerome Powell just bless the US market rally?
Photographer: Nathan Howard/Bloomberg
There’s a mantra in markets that you’re not supposed to “fight” the Federal Reserve. Policymakers fight inflation by tightening “financial conditions,” and broad market rallies tend to work against that objective. So as the thinking goes, market bulls are just asking for trouble when they defy the most powerful policymaking establishment in global finance. But if you take Fed Chair Jerome Powell at his word, that thinking is no longer quite accurate.
After a 14% run-up in US stocks this year, Powell was given a golden opportunity on Wednesday — had he wanted one — to jawbone markets back into their place during a panel hosted by the European Central Bank in Sintra, Portugal. Not only did he take a pass, but he implicitly seemed to give the bulls the all-clear. Asked by moderator and CNBC journalist Sara Eisen whether recent stock and bond advances were “counterproductive,” Powell sounded as if he was basically fine with them.