Powell Takes the Stage Again: Will He Make the Market Happy This Time?

The stock market is eagerly awaiting Federal Reserve Chairman Jerome Powell's speech at the Economic Club of New York, hoping for a more dovish tone that could boost market sentiment. Powell's previous remarks at the Jackson Hole Economic Policy Symposium in 2024 sparked a rally in equities, with the S&P 500 gaining approximately 1% on the day of his speech. Investors are now looking for a similar positive reaction as Powell takes the stage again in the early morning.

History shows that Powell's speeches have had a significant impact on market sentiment. Since 2014, the S&P 500 has averaged a rise of 0.3% following his testimonies, according to Deutsche Bank Data. However, the moves have generally been contained, with the S&P 500 gaining more than 1% just three times and falling more than 1% just once. The current market is hoping for a more substantial positive reaction, given the recent volatility and uncertainty.



What are investors hoping to hear from Powell this time? After the Fed's decision to leave the policy rate unchanged at the range of 5.25%-5.5% in September, investors are looking for guidance on the future path of interest rates. The Fed's Summary of Economic Projections (SEP) showed that the majority of policymakers saw it appropriate to raise the interest rate one more time before the end of the year. However, changes in market dynamics and macroeconomic data releases since the Fed's September policy announcements have made it difficult for investors to make up their minds about the Fed's next policy step.

Investors are particularly interested in Powell's comments on the global economic outlook and the potential impact on the US economy. Recent data releases, such as the strong US jobs report and the resilience of the economy, have caused investors to second-guess themselves about the rate outlook. If Powell expresses confidence in the US economy relative to other major economies, it could bolster market sentiment and lead to a rally in equities.