By:  Thomas Steffanci, PhD, Senior Portfolio Manager

The stock market (1) has reacted bullishly today to Federal Reserve Chairman Jerome Powell’s prepared remarks at the Federal Reserve Bank of Kansas City’s Economic Policy Symposium in Jackson Hole, WY. It was his first public admission of where he stood on tapering that pushed stocks higher: “At the FOMC’s recent July meeting, I was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year.” Despite Powell reiterating his Federal Open Market Committee (FOMC) meeting comments, the speech comes away as especially dovish,  in saying it would be wrong to respond to temporary fluctuations in inflation and his repeated statement that “the timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of an interest rate liftoff,”  added to the dovish tone.

It was a masterful performance from a Chairman whose FOMC committee members were split on the timing and speed of tapering. Without giving a specific timetable for tapering, he has bided his time to see more data on unemployment and inflation. He will get his first important data point in Thursday’s August payroll employment report.

1. The S&P 500 is designed to be a leading indicator of U.S. equities and is commonly used as a proxy for the U.S. stock market.

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