Watch out for the bus! The potential impact of the rate hike and forecast revision from the FOMC is being priced into both bond yields and stock prices, and the adjustment period will likely be fairly rapid. We may see another re-test of the stock market lows in June, which will reverse most all of the portfolio gains this summer.
Bottom line: the Powell Jackson Hole speech reinforces my belief that the Federal Reserve is about to begin the long process of normalizing monetary policy, which means a gradual shift away from the near zero rates begun in March 2020. Rates will eventually rise which warrants a shift to more defensive bond portfolio position with shorter maturities. The writing is on the wall. I do not see this policy shift as a threat to further gains in the stock market, however, and I expect equities will continue to outperform bonds over time.
