Today, we dive into the heart of Powell's address, analyse its far-reaching implications and use that to present year-end price targets for the assets in our barbell portfolio.
Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results.
Summary of Powell's Jackson Hole speech
Powell's speech lasted approximately 15 minutes, and journalists did not ask questions at Jackson Hole.Let's look at the key points from the speech:
- "The time has come for policy to adjust." This is a clear announcement that the Fed will cut rates at the September Fed Meeting.
- "The cooling in labour markets is unmistakable" and "further cooling in the labour market is unwelcomed." This is a clear shift from focusing on inflation to the labour market and its moderating/weakening, but it is still relatively fine for now. They just don't want to see a continuation of this.
- "My confidence has grown that inflation is on target for 2.0%". That's the Fed's inflation target, so all is good here, and the focus of policy shifts from inflation to the labour market.
- "We will do everything we can to support a strong labour market" and "the current level of our policy rate gives us ample room to respond." Powell is telling us that the current rate is quite restrictive and that they have a lot of room to cut Interest Rates, especially if the labour market weakens further. This suggests 75bps to 100bps of cuts in 2024.
Cryptonary's take
Ultimately, this is as dovish/bullish as Powell could have got.There's a clear shift today from Powell away from a focus on inflation and now to the labour market, with an emphasis on the fact that they're going to be cutting rates in September and that they have some cuts to do—i.e., they're going to undergo a rate-cutting cycle here to get in front of further labour market weakening.
This is very positive for risk assets, assuming growth and the labour market hold up over the coming months; if they do, crypto prices will be much higher come Christmas. The market has reacted positively here.
If you're looking to add exposure, we'd look at buying up dips over the coming weeks; we wouldn't necessarily chase today's move. Remember, there is a Jobs data release on September 6th; if that comes in weaker, that might provide the opportunity to put the remaining USDT to work. Overall, super positive. A rate-cutting cycle is coming. And, if the labour market and growth hold up (I expect they both will), then I wouldn't be surprised to see these prices come year-end:
- BTC = north of $85,000
- SOL = north of $300
- ETH = north of $4,000
- WIF = north of $7
- POP= north of $2
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