The head of the Fed, J. Powell, sounded an unprecedentedly soft tone. Powell said yesterday that if the Fed starts cutting interest rates when inflation reaches 2 percent, it will be too late. Although these words are simply a fact that many investors understand, such rhetoric from the bank manager marks a changed situation and greater chances of interest rate cuts.
Powell acknowledged that inflationary pressures are easing and a "hard landing" scenario is unlikely. Markets have further raised expectations of a rate cut. If on Thursday the markets were expecting 2 Fed interest rate cuts this year, now the chances are getting closer to 3 cuts of 25 basis points each. However, the inflationary pressure has not yet completely disappeared – producer price inflation has started to grow again and exceeded economists' forecasts in June, and container shipping prices have increased by almost 300 percent over the year.
You'll likely hear more about Trump in this newsletter. After the assassination attempt on Trump, the former president's chances of returning to the White House increased even more (RealClearPolitics average is 66 percent). At the Republican convention yesterday, Trump announced that he had chosen Senator JD Vance for the post of vice president. The young senator from Ohio is a staunch Trump supporter, and has so far been vocal against US support for Ukraine. As Trump's chances grow, and Biden still unable to find stable ground, some investors are adopting the "Trump strategy": buying stocks of oil companies, arms manufacturers and private prison operators. The positions of "long" (long) friendly and "short" (short) hostile countries are also evident, e.g. sell Chinese and buy Japanese or South Korean shares.
