Say what you might about the narrow breadth of the rally in the S&P 500 (Index: SPX), there's no denying that it's 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 thresholds. More remarkably, the trajectory of the S&P 500 falls well within the red zone forecast range we added to the alternative futures chart several weeks ago.
(Click on image to enlarge)
The big news of the week that 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 red zone forecast.
Comments
Log in or sign up to join the conversation.