Home Headlines Powell’s pivot on inflation turns the trader pandemic playbook on its head #englishheadline #Powells #pivot #inflation #turns #trader #pandemic #playbook

Powell’s pivot on inflation turns the trader pandemic playbook on its head #englishheadline #Powells #pivot #inflation #turns #trader #pandemic #playbook

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A trader works on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Sept. 20, 2021.

Michael Nagle | Bloomberg | Getty Images

The market is facing a conundrum. 

Federal Reserve Chair Jerome Powell has thrown a monkey wrench into the investor playbook. Investors have been worried they will get hurt by the omicron variant further slowing growth and exacerbating supply chain issues, and they have been buying tech and selling cyclicals. 

Now Powell has served notice that because of omicron and continuing supply chain issues, they are getting more hawkish.

Powell may have been using omicron as an excuse to get rid of a policy (“transitory”) that was no longer useful, but regardless.

The Fed getting more hawkish, not less hawkish, was not part of the market narrative.

Now even tech, which is richly priced, is in jeopardy.

Through Covid, the delta variant, and now through omicron, the market has come to believe one thing: Tech wins, no matter what.

But with Powell telling the world he wants to drop the word “transitory” from the language and speed up tapering, and implying interest rates are going up faster than expected, the knee-jerk reaction should be to sell tech.

What to do?

That’s the conundrum: Bulls keep saying the consumer is strong, but premature Fed tightening is the great killer of bull markets, so “buy the dip” is getting tougher to argue.  

“We had been thinking the markets were in a win-win situation,” Matt Maley, equity strategist at Miller Tabak, told me. “If omicron is not a big problem, then we are fine. If it is a big problem, the Fed will come to the rescue with even more dovishness. Now they’re saying they’re going to tighten because of all these variants and supply chain issues? Powell has turned everything on its head.”

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#Powells #pivot #inflation #turns #trader #pandemic #playbook

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