Powell's Late Night Broadcast: Economy Strong, No Rush to Cut Rates Amid Trump Policies

The stock market was eagerly awaiting Federal Reserve Chairman Jerome Powell's late-night broadcast to Congress before making a move. And now it's heading higher. How does it stack up to history? Investors were on the edge of their seats to hear Powell's take on the U.S. economy, the path of rate increases, and the potential impact of Trump's policies before making a move. And no wonder—a word from Powell has the ability to send the S&P 500 soaring or knock it down a peg. And send it soaring he did. The S&P 500 has risen 0.8%, while the Dow Jones Industrial Average has climbed 1.2%, and the Nasdaq Composite has jumped 0.6%.

History, though, shows that this isn't all that out of the ordinary. Since 2014, the S&P 500 has averaged a rise of 0.4% following Powell's late-night broadcasts, according to Deutsche Bank Data. But the moves have generally been contained. Of the 18 appearances starting in February 2014, the S&P 500 has gained more than 1% just four times and fallen more than 1% just twice. But the current rise, if it holds, would be the fourth-best going back to 2014.

What boosted the stock market? Powell reassured investors that the economy is strong and that the Federal Reserve does not need to rush to cut interest rates. "The economy is in a good place," Powell said. "We have time to understand the impact of Trump's policies and make adjustments as needed."

Powell also emphasized that the Fed is data-dependent and will continue to monitor economic indicators closely. "If the totality of the data were to indicate that a rate cut is warranted, we would be prepared to act," Powell said. "But for now, we see no need to rush into a rate cut."

Powell's comments come as the market has been pricing in a rate cut this year, with the probability of a cut by December now at 65%, up from 35% just one month ago. However, not everyone is convinced that a rate cut is necessary. "I do not think the Fed needs to rush into a rate cut at this point," writes the Boock Report's Peter Boockvar. "The economy is strong, and inflation remains under control."

Powell's late-night broadcast also addressed the potential impact of Trump's policies on the economy. He acknowledged that Trump's policies, such as tax cuts and deregulation, could have both positive and negative effects on the economy. However, Powell emphasized that the Fed is focused on its dual mandate of maximum employment and stable prices, and will continue to make decisions based on data and economic indicators.

Powell's comments come as the market has been grappling with uncertainty surrounding Trump's policies and their potential impact on the economy. However, Powell's reassurance that the economy is strong and that the Fed is data-dependent has helped to ease some of those concerns.

In conclusion, Powell's late-night broadcast to Congress has helped to boost the stock market, as investors are reassured that the economy is strong and that the Fed is not rushing to cut interest rates. Powell's comments also highlight the Fed's data-dependent approach to monetary policy and its focus on its dual mandate of maximum employment and stable prices. As the market continues to grapple with uncertainty surrounding Trump's policies, Powell's comments serve as a reminder that the Fed is committed to making decisions based on data and economic indicators.