Image Source: Pixabay

On balance, Federal Reserve Chair seems like a great job. Having access to the levers of monetary policy must be an awesome responsibility. That said, I must believe that two days spent in front of Congress must be among the most onerous responsibilities of anyone in that lofty position. So far today, Jerome Powell has managed to deftly sidestep an array of potential “trap” questions from both sides of the aisle, allowing stocks to revel in the benefits of lower oil prices.

As Fed Chair, there are always people who will be critical of your performance. When the critics include the current President, it must be that much more uncomfortable. The semi-annual Congressional testimony requires a Fed Chair to face a horde of Representatives (today) and Senators (tomorrow) who are competing to score political points with their party and craft sound bites that could resonate with their constituents.In short, Chair Powell has managed to stay on message about remaining cautious ahead of the potential effects of tariffs and resisted getting sucked into partisan politics.

Stocks were already in rally mode before Powell released his pre-written remarks, and since nothing he wrote or later said was particularly market-moving, equity traders could resume buying. As we’ve been noting, if oil traders were relatively unconcerned with events in Iran, then it seemed sensible for stock traders to take their lead. And now, oil prices have completely given back all their conflict premium. That reduces inflationary pressures throughout the economy and is indeed good news for most companies.Hence, we find ourselves in spitting distance of fresh all-time highs for key indices.

West Texas Crude Oil Futures, Rolling Front-Month, 2-Weeks, 10-Minute Candles

(Click on image to enlarge)

Source: Interactive Brokers

Stocks are also shrugging off a weaker than expected Conference Board Consumer Confidence report (93.0 vs. 99.8 expected and 98.4 last).The weaker reading led to some downticks in bond yields but is being perceived by equity markets benignly.Perhaps the results were depressed by the effects of the Israel-Iran conflict, which are now behind us.Or, since inflation concerns tend to follow the pump price of gasoline, the negative effects can be perceived as (dare I say) transitory. 

For today, despite the efforts of some members of Congress and thanks to some deft footwork by Chair Powell, the rally proceeds unabated.Over the next few days we can debate whether geopolitics actually mattered.The effects certainly seem asymmetrical – a mere speed bump when negative but a rationale for an advance when positive. But if true, most investors don’t seem to mind.

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