Chairman Jerome Powell finally revealed the Fed’s future intentions. And the markets don’t like it.
With the BRICS Johannesburg meeting taking place this week, the markets have had fewer things to worry about. On Friday, however, at the Jackson Hole meeting Federal Reserve Chairman Jerome Powell established the US short-term monetary policy. And it does not look positive.
But first, let’s start with some numbers:
The S&P 500 and the Dow Jones slightly dropped this week by -0.08% and -0.96% respectively;
On the contrary, the Nasdaq Composite ended the week in green with +0.71%;
In Europe, Frankfurt dropped by -0.15%, while London and Milan both grew by +1.05% and +0.59% respectively;
In Asia, the Tokyo Nikkei rose by +0.11%, Hong Kong by +0.89% and Shanghai dropped by -1.98%.
Jerome Powell at Jackson Hole
Following the latest interest rate hike by the Fed, markets hoped the monetary tightening was over. After all, core inflation was steadily declining while headline consumer prices remained more or less stable at 3.2%.
However, at the Jackson Hole meeting on Friday, Jerome Powell expressed the Fed’s intention to continue rate hikes. The tightening will continue until inflation the Fed sees a stable decline in inflation.
Part of the Fed’s reasoning is that the US economy is holding up incredibly well despite 12 consecutive hikes. In the second quarter of the year, the American GDP grew more than expected while unemployment continued its historical downward curve.
Until the economy manages to hold up well and inflation is not fully tamed, the Fed will increase interest rates. Even if markets don’t like it.
NVIDIA exceeds expectations
Another crucial but expected market news this week was the release of NVIDIA’s quarterly earnings. Both revenues and earnings per share crushed market expectations, which already were considerably high.
NVIDIA is the leading company in microchip design, profiting from the latest AI craze.
Their H100 chip is the fastest and most developed AI chip on the market, crushing the competition. NVIDIA attracted the respect and admiration of other tech giants, including rivals in AI Google and Microsoft.
NVIDIA is the real winner of the AI boom. While other tech giants battle to gain a percentage more in market share, NVIDIA provides crucial back-end products that everybody needs.
Now NVIDIA needs to focus on the increasing US restrictions against the Chinese market. The company is caught in the crossfire of the trade war between the world’s largest economies.
In any case, markets rewarded NVIDIA with a +8.48% climb in the stock price.
