We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Implications Of Jerome Powell & The Feds Extended Dovish Stance
Read MoreHide Full Article
The markets are catalyzed by yet another economic backstop that solidifies this market rally’s theme: Don't Fight The Fed. Federal Reserve released its fed funds rate dot plot chart (illustrated below) where FOMC participants are projecting that there will be no rate hikes until 2022.
Elongated Low-Interest Rate Impact
This interest rate projection is having a mixed impact on stocks. It is good news for high-growth tech firms that have been provided with a rare tailwind by the pandemic and are now able to discount their future cash flows at the lowest interest rates in history, making these companies more valuable from an analysts standpoint.
The growth-driven Nasdaq 100 (QQQ - Free Report) is continuing to hit all-time highs with its biggest catalyzers being Microsoft (MSFT - Free Report) , Apple (AAPL - Free Report) , and Amazon (AMZN - Free Report) . All three of these over trillion-dollar businesses closed at their own all-time highs.
This elongated low-interest-rate environment is hitting the banks hard. The KBW Bank Index was down over 6% today, with Bank of America (BAC - Free Report) , PNC (PNC - Free Report) , and Wells Fargo (WFC - Free Report) , leading the charge downward due to their extensive interest rate exposure.
Jerome Powell said in his Wednesday speech that the GDP decline in Q2 is anticipated to be the worst in history. Inflation remains below the 2% target. Jerome and his band of dovish governors plan on maintaining their monetary stimulus levels but are putting the ball in congresses court, expressing that there will likely need to be more fiscal stimulus.
Jerome's overall outlook was bleak, stating there will likely be millions of Americans out of a job for years to come, and economic uncertainty is exceptionally high. Still, Fed Chair Powell said he is committed to utilizing all the tools available to him and the Fed to maintain an economic backstop.
The equity markets were all over the board going into the close as traders attempt to decipher what to make of Jerome Powell's speech. Nasdaq closed higher at another record close, but both the Dow Jones and S&P 500 Indices closed lower.
What Could Go Wrong?
The markets have been trading higher on the positive unemployment figures, and optimism about a swift economic reopening across the US. The one thing that isn't being priced in is the enormous amount of risk associated with another wave of the virus.
The recent protests around the US will be a big test for a potential second COVID wave. A second wave would be devastating for the economy as it would extend consumer fears, and in turn, the economic downturn.
Retail investors continue to pour money into the markets on the implication that stocks do nothing but go up. Jerome Powell alluded to the idea that the markets need to assess their current risk/reward levels, and I could not agree more with this inclination. The current market risk/reward levels are atrocious, and I would be extremely cautious with my stock purchases.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better. See these 7 breakthrough stocks now>>
Zacks' 7 Best Strong Buy Stocks (New Research Report)
Valued at $99, click below to receive our just-released report predicting the 7 stocks that will soar highest in the coming month.
Image: Bigstock
Implications Of Jerome Powell & The Feds Extended Dovish Stance
The markets are catalyzed by yet another economic backstop that solidifies this market rally’s theme: Don't Fight The Fed. Federal Reserve released its fed funds rate dot plot chart (illustrated below) where FOMC participants are projecting that there will be no rate hikes until 2022.
Elongated Low-Interest Rate Impact
This interest rate projection is having a mixed impact on stocks. It is good news for high-growth tech firms that have been provided with a rare tailwind by the pandemic and are now able to discount their future cash flows at the lowest interest rates in history, making these companies more valuable from an analysts standpoint.
The growth-driven Nasdaq 100 (QQQ - Free Report) is continuing to hit all-time highs with its biggest catalyzers being Microsoft (MSFT - Free Report) , Apple (AAPL - Free Report) , and Amazon (AMZN - Free Report) . All three of these over trillion-dollar businesses closed at their own all-time highs.
This elongated low-interest-rate environment is hitting the banks hard. The KBW Bank Index was down over 6% today, with Bank of America (BAC - Free Report) , PNC (PNC - Free Report) , and Wells Fargo (WFC - Free Report) , leading the charge downward due to their extensive interest rate exposure.
Jerome Powell said in his Wednesday speech that the GDP decline in Q2 is anticipated to be the worst in history. Inflation remains below the 2% target. Jerome and his band of dovish governors plan on maintaining their monetary stimulus levels but are putting the ball in congresses court, expressing that there will likely need to be more fiscal stimulus.
Jerome's overall outlook was bleak, stating there will likely be millions of Americans out of a job for years to come, and economic uncertainty is exceptionally high. Still, Fed Chair Powell said he is committed to utilizing all the tools available to him and the Fed to maintain an economic backstop.
The equity markets were all over the board going into the close as traders attempt to decipher what to make of Jerome Powell's speech. Nasdaq closed higher at another record close, but both the Dow Jones and S&P 500 Indices closed lower.
What Could Go Wrong?
The markets have been trading higher on the positive unemployment figures, and optimism about a swift economic reopening across the US. The one thing that isn't being priced in is the enormous amount of risk associated with another wave of the virus.
The recent protests around the US will be a big test for a potential second COVID wave. A second wave would be devastating for the economy as it would extend consumer fears, and in turn, the economic downturn.
Retail investors continue to pour money into the markets on the implication that stocks do nothing but go up. Jerome Powell alluded to the idea that the markets need to assess their current risk/reward levels, and I could not agree more with this inclination. The current market risk/reward levels are atrocious, and I would be extremely cautious with my stock purchases.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>