Say what you might about the narrow breadth of the rally in the S&P 500 (Index: SPX), there's no denying that its carving out record highs on a daily basis.
After holding below the 3,400 level for no apparent reason in the preceding week, the index broke through and, five trading days later, has broken through the 3,500 threshold. More remarkably, the trajectory of the S&P 500 falls well within the redzone forecast range we added to the alternative futures chart several weeks ago.
The big news of the week that was came from the Fed's annual retreat in Jackson Hole, Wyoming, where Jerome Powell confirmed the Federal Reserve's inflation target would no longer be a ceiling, but instead be an average. Which is to say the Fed will tolerate inflation running higher than its official 2.0% target for sustained periods of time going forward.
That tolerance means the Fed will leave the Federal Funds Rate within its zero-range bound for the indefinite future. For investors, that equates to a relatively expansionary monetary policy compared to the Fed's previous framework. But not more expansionary than what they've been expecting since mid-July 2020, which is why the trajectory of the S&P 500 continues to track along with the redzone forecast.
There really wasn't much else in the way of market-moving news in the past week, where we scraped the following headlines from the week's newstream.
- Monday, 24 August 2020
- Daily signs and portents for the U.S. economy:
- Oil prices rise as storms cut U.S. production
- Republicans, Democrats trade blame for stalled U.S. coronavirus aid legislation
- Top U.S., Chinese official optimistic on Phase 1 trade deal after phone call: USTR
- Bigger trouble unfolding in Latin America:
- Brazil's GDP probably crumbled 9.4% in second quarter under coronavirus spread, Reuters poll shows
- Colombian businesses ask government for up to $13.1 billion to stave off collapses
- Bigger trouble, stimulus still developing in China:
- Chinese banks to post first first-half profit drop in over a decade amid pandemic pain
- China will step up technology innovation to drive growth: President Xi
- S&P, Nasdaq close at new highs as Wall Street rides bull momentum
- Tuesday, 25 August 2020
- Daily signs and portents for the U.S. economy:
- Oil hits five-month highs as U.S. producers cut output ahead of hurricane
- U.S., China reaffirm commitment to Phase 1 trade deal in phone call
- U.S. consumer confidence at six-year low; underscores concerns about economic recovery
- Trump says he will add $1 billion to food for families program
- Bigger trouble developing in Eurozone:
- S&P 500, Nasdaq close at record highs on trade, vaccine developments
- Wednesday, 26 August 2020
- Oil steadies; virus concerns weigh as hurricane heads to U.S.
- Bigger trouble developing in Mexico:
- Bigger stimulus developing in Eurozone, Japan, China:
- German coalition agrees 10 billion euro extension of coronavirus relief
- Top Japan government spokesman signals push to re-open economy, boost stimulus
- China will release funds to local governments more quickly to boost economy
- Fed minion has gloomy outlook, ECB minions ready to sit on hands again:
- Fed's Bowman sees slow, uneven recovery ahead
- ECB can wait for data as economy grows in line with projections: policymaker
- Wall Street closes higher as momentum stocks push S&P 500, Nasdaq to new highs
- Thursday, 27 August 2020
- Daily signs and portents for the U.S. economy:
- Oil prices slip as Hurricane Laura's blow unlikely to have sustained impact
- U.S. labor market recovery slowing; economists urge more fiscal stimulus
- Bigger trouble developing in India, South Korea, China:
- Recovery hopes dashed for India's recession-hit economy: Reuters poll
- South Korea's August exports seen falling for sixth month on fewer working days: Reuters poll
- We share workers: Chinese factories redeploy staff to weather pandemic blow
- Signs of bigger stimulus gaining traction in China:
- Fed minions announce change in inflation target policy:
- Fed to target 2% average inflation, elevates focus on jobs
- In landmark shift, Fed rewrites approach to inflation, labor market
- What is the Fed's new policy framework, and why does it matter?
- U.S. inflation seen rising but still below target after speech by Fed's Powell
- Powell: Jobs recovery faces 'long tail' of a couple of years
- S&P, Dow close higher on new Fed inflation stance, COVID test hopes
- Friday, 28 August 2020
- Daily signs and portents for the U.S. economy:
- Oil prices dip as producers, refiners avoid worst of hurricane
- U.S. consumer spending rises strongly; outlook uncertain as fiscal stimulus fades
- White House suggests $1.3 trln coronavirus aid bill; Pelosi says not enough
- After changing inflation target, Fed minions not sure what target will be:
- Fed policymakers do their own math on 'average' inflation
- Fed's targeting of higher inflation could backfire, paper suggests
- Fed minions also not sure what U.S. economic recovery will look like:
- Fed's Harker sees shape of recovery as 'bumpy swoosh'
- Fed's Mester says U.S. economy could end 2020 down 6% for the year
- Fed's Mester: Recovery will be slow and require more fiscal and monetary support
- Tech powers S&P 500 to record closing high, Dow now positive for the year
Those were what we thought the market moving headlines of the past week were, but other stuff happened too. Check out Barry Ritholtz' succinct summary of positives and negatives he found in the rest of the week's economics and markets news!
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