Dow down nearly 900 points:read speech Chair Powell | Page 2 | Investing | Discussion forum

Nirvana7734 said

My thoughts exactly, my friend. Anybody who has been paying attention to the Bank of Canada and Federal Reserve already knows the intention to combat inflation via increased interest rates BECAUSE THEY'VE ALREADY TOLD US THIS.

The fact that the market dropped substantively on 26-Aug-2022 means that there is some other play in action here. My favourite market blogger, http://www.pretzelcharts.com, has one prediction that the S&P is targeted to end up at ~2450 (an ~40% drop from it's current value) sometime around mid-2023. Since I moved back to cash early this year, I'm curious to see if his prediction plays out.  

Central Banks also told us that rates would be on hold well into 2023. https://www.bnnbloomberg.ca/bank-of-canada-keeps-key-interest-rate-on-hold-1.1514208

Central Banks change what they say all the time. They are not independent actors and are forced to respond to economic developments which are unpredictable. A bit like future market movements.

Central bankers don’t have crystal balls either and are no different from us. They make predictions, sometimes right, sometimes wrong.

It’s totally fine for them to adjust their policy as market changes esp with global macro events unfold.

Bitcoin has a place in the investment world, what is the proper price is 100% supply demand driven by both smart and not so smart people.

It’s just not fair comparing Tesla to Variant in my mind. Trying to make the last $5 waiting for a stock to go to zero turn the trade into just a gamble, no longer a rational trade. Reddit crowd already proved it no matter how the fundamental and financial may sound, collective power of little investors can humble the biggest and smartest hedge funds.

Nirvana7734 said

Right. My point was that attributing the ~3% Dow/S&P price drop on 26-Aug-2022 to Jerome Powell's speech alone is doubtful given that the markets are forward-looking and that nobody was surprised about what Powell said.  

Yes, the markets are forward looking. And right now they are looking for signs that inflation has been dealt with and the pace of interest rate increases is slowing down. Because that will translate into good news on profits in 2023.

Powell’s speech did come as a surprise. Markets took good news on CPI and Powell’s July speech as a sign of a turn around. This is what he said in July:

“ Over coming months, we will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2 percent. We anticipate that ongoing increases in the target range for the federal funds rate will be appropriate; the pace of those increases will continue to depend on the incoming data and the evolving outlook for the economy. Today’s increase is the—in the target range is the second 75 basis point increase in as many meetings. While another unusually large increase could be appropriate at our next meeting, that is a decision that will depend on the data we get between now and then. We will continue to make our decisions meeting by meeting and communicating—and communicate our thinking as clearly as possible. As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation.”

The sentiment he conveyed this week was quite different. That’s just an opinion but in the end none of it matters. Actual inflation and profits will determine market returns rather than who said what.