Moon Shot?

Fed Chair Jerome Powell was a bit less hawkish today. He said he still thinks there is a "path to a soft or softish" landing for the economy. He also suggested that the next hike in the federal funds rate on December 14 is likely to be 50bps rather than 75bps. So stock prices exploded to the upside. The DJIA soared more than 735 points, or 2.2%. The S&P 500 rose 3.1%. The Nasdaq shot up 4.4%.

Investors seem to have concluded that inflation peaked during the summer and will continue to moderate through next year. That's been our forecast since earlier this year. They were happy to hear Powell say today that the Fed doesn't want to tighten too much if that won't be necessary to bring inflation down.