His message, delivered at a symposium in Jackson Hole Wyoming, was short, concise, and not very sweet. The gist of his speech was that the central bank’s battle against high inflation would last longer than many had previously thought and that interest rates would have to rise higher and stay high until there was meaningful progress bringing down inflation.
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.
"We also appear to be seeing three emerging forces that may prompt investors to temper their elevated expectations: accelerating inflation, a more aggressive Federal Reserve and a looming trade war."
