Fed's Powell Hints At Policy Shifts, Dollar Plunges, Gold Rallies As Investors Flock To Rate-Cut Winners: This Week In The Markets

In a pivotal address at the Jackson Hole Symposium in Wyoming, Federal Reserve Chair Jerome Powell signaled a forthcoming shift in interest rates Friday, stating “the time has come for policy to adjust.”

His remarks suggest the Fed is on the cusp of easing interest rates, yet Powell emphasized the importance of data-driven decisions, carefully avoiding any commitment to specific timing or the magnitude of those cuts.

As the Fed becomes more confident in inflation gradually returning to its 2% target, Powell emphasized the need to closely monitor the labor market, which he said is showing "unmistakable" signs of cooling.

The anticipation of impending interest rate cuts extended a decline in the dollar, which tumbled to its lowest level in over a year. This shift in policy direction invigorated interest rate-sensitive markets, with small-cap stocks, real estate and regional banks surging as clear beneficiaries following Powell’s remarks.

Simultaneously, gold — which historically moves inversely to interest rates and the dollar — soared to a record high, surpassing $2,500 per ounce.

All major U.S. equity indices ended the week in positive territory, with the S&P 500, represented by the SPDR S&P 500 ETF Trust SPY, rising 1.3%. Small-cap stocks significantly outperformed their large-cap counterparts, as the iShares Russell 2000 ETF IWM surged 3.4% for the week.

Election-Proof Stocks

Market strategist Jay Woods said certain stocks, especially in the defense and cybersecurity sectors, could perform well regardless of whether Donald Trump or Kamala Harris wins the presidency. Notable mentions include Boeing Company BA, Lockheed Martin Corp. LMT and Palo Alto Networks Inc. PANW, alongside Woods' recommended exchange traded funds for diversified exposure.

Job Growth Revised

The U.S. economy added 818,000 fewer jobs than initially reported from April 2023 to March 2024. This significant revision increases expectations for interest rate cuts, as it suggests the labor market is weaker than previously thought.

EV Ambitions Scaled

Ford Motor Co. F, General Motors Co. GM and Stellantis N.V. STLA are reducing their electric vehicle investments due to weakening demand. Ford canceled a planned electric SUV this week, while GM and Stellantis delayed new EV projects, signaling a strategic shift in uncertain market conditions.

Gold Bars Shine

With gold prices cracking $2,500 per ounce, a standard 400-troy-ounce gold bar is now valued at $1 million. The surge is driven by expectations of Federal Reserve interest rate cuts and a weakening U.S. dollar, boosting gold’s appeal to investors.

Photo created using artificial intelligence via MidJourney.