'More harm than good' could come from adjusting monetary policy now; so said Chairman Powell during his virtual Jackson Hole presentation. Recently we've had slight firming in key rates which did not negative impact markets or give any real concern to business. Covid rages; and that gave Powell cover as well, to essentially maintain the dovish policy which everyone knows will shift.

Essentially the Chairman errs on the side of caution; continues to adhere to the FOMC's official line about eventual tapering, but not doing so until aspects of growth are clearer or persistent, as well as the timing and pace not correlated to actually hiking interest rates. He said that requires a more rigid test; and we will interpret as to mean persisting basic policy until late 2022 or early 2023. It does not mean tapering does start this year; or perhaps already initiating.

The Chairman views Employment gains solid, faster than expected, and does allude to history's examples of how higher wages / prices sometimes endure, even when policy is tightened and inflation ebbs. No kidding; that's been my point for some time as I've opined that you can't really reduce all these recent wage increases (except for overpaid executives perhaps); and even the basic food supplies and so on, won't go back to where they were as people actually get used to the higher levels. I believe the Western 'drought' is part of this too.

So the takeaway is that the Fed will ultimately move; but is divorcing 'tapering' from hiking rates in a formal fashion; and that's the meat for the S&P to hold it together as best it can. All this amidst a botched evacuation plan from Kabul; a rampant Covid / delta virus that probably hasn't peaked (a few states maybe but that's insufficient); and very uncertain 'actual' (inflation adjusted) prospects for the next couple Quarters, which will depend on Covid (even though we've had excellent snap-back since nailing the low back in March of 'last' year).

Executive summary:

• Slow and steady is the Fed approach; and thus is not disruptive to the markets as such; which doesn't mean we don't have interim shakeouts; but does keep the Fed in the market's corner, as we look to 2022;

• Chairman Powell did not focus on 'price stability'; relegating it more to a long-term possibility if inflation would indeed rear its head persistently;

• We think inflation already has; though may be tempered slightly by the incredible resurgence of the pandemic, pretty much on a global basis; however Fed rationalizations suggest they'll remain restrained for now;

• Aggregate demand is not going to do more than return to pre-pandemic growth levels, if we're lucky, by next year; and that's an achievement; so economic growth anticipation is generally factored-into the S&P;

• That's a reason the market is so jittery about Fed policy; nevertheless so many funds are playing 'catch-up', and so many investors are enjoying a continuing friendly environment; that doesn't mean we avoid corrections;

• Proof of higher price to 'stick' comes from TSM (Taiwan Semiconductor) today indicating their advanced processors will rise by around 10% (we won't break it down); while most device chips will increase by about 20%; hence inflation will be alive & well in technology; part of the CPI as well;

• Thinking of 'pass-through' into supply-chains; and you get higher prices in all kinds of products, from computers to automotive to .. everything;

• China plans to block 'all' U.S. IPO listings that relate to 'data heavy' firms; that's a bit complex to unravel, but suggests Beijing is not calming down;
• Keep in mind Oil is higher primarily as Hurricane Ida approaches; sure New Orleans has ordered evacuations for those outside the levee system but I'm not sure I'd trust those levees as even Cat. 3-4 might spin-up, and the system's reliability hasn't been really tested since Hurricane Katrina;
• Affirm inked a buy now/pay later deal with Amazon; and we hear (not at all surprised) that Apple will do the same with Goldman Sachs (Apple Card is not broken-out in their 'Services Sector' by Apple, but it's clearly successful; and predates 'Marcus');
• Prayers for our troops as well as civilians trying to get out; and let the UN heed their demands for food and medicine in our wake (there are stories of the UN planning an air-link to do just that; fine, preferably let Pakistan pay for it; after all they financed and directed a lot of the Taliban actions);
• Speaking of early Islamists; Sirhan Sirhan, the Palestinian who murdered Robert F. Kennedy at the Ambassador Hotel in Los Angeles; is now up for parole; it has been referred to Gov. Newsom; I shook Bobby Kennedy's hands 2 days earlier on a San Francisco cable car before he went to L.A. and I joined a candlelight vigil outside the hospital;
• S&P might dip early in the week; but then try grinding a bit higher yet with the caution that this is the seasonally roughest time of the year in terms of money flows; if anything goes wrong;
• Technicians are again talking about 'record' numbers equating to a couple previous similar August levels; 1929 and 1987; well, I wasn't alive to call the former pattern (sorry); but did call the latter 'live' on TV back then; let's be aware of such things; but note some technicians or prognosticators of this era, have largely been calling for disaster all the way up; for sure we should 'at least correct', and sooner or later we will; maybe not just now;
• I do concur that once we break the 50-DMA heading lower it might get a lot trickier, especially if it happens any time over the next 7 weeks; what makes that hard to do: if Apple and Amazon etc. make new highs; Oil is variable as it will obviously retreat a bit after Hurricane Ida passes.. that of course presumes no crippling damage to the Louisiana/Texas refineries; and if Oil breaks too hard, Banks follow; well you'll get your shakeout;
• If this is a Cat 4 and smashes Baton Rouge or even East Texas refineries then all bets are off, with Oil capable of staying higher longer (70's-80's).

As to Ida . . the storm became 'Hurricane Ida', and is now estimated to be a Category 4; so that suggests winds of 140 mph around the 'eye-wall'; and 'if' it moves just a degree or so to the left (see blue model on the map later on), it threatens the Oil refineries even more than before. If serious damage, Oil will indeed push 75-80; but wouldn't be so good for stocks like a normal increase based on demand. In any event if you live in the coastal path, this is a good time to hurriedly fly due West. I'd not bank on levees holding in Nawlins.

Market behavior continues with the broad Averages moving above neutral as the S&P and NDX are also 'not' jammed overbought; though very extended.

At this point the 'punch-bowl' (TINA) is not being removed; growth can work; so can speculative stocks keeping in mind that risk everywhere is rising and complacency is increasing. Tapering is being divorced from Fed rate hikes; a part of the 'comfort food' Wall Street wants to keep the appetites active.