•Flipping the Script – In a week that was wholly leveraged towards today’s Jackson Hole ‘conference’, even a telegraphed move by Powell and Co seemed to catch the market off guard some. The Fed is adjusting to a world where wage inflation had been persistently sluggish in response to low unemployment and inflation had persistently under shot the 2% target. Covid-19 has only served to tilt these trends in a much more deflationary direction. As a result, the Fed will allow inflation to overshoot the target - if it can - for a potentially prolonged period of time. The USD reacted like a yo-yo but currently resides where it did pre-Powell; it remains below our concern for risk level @ 94. Ultimately the lower for longer regarding rates and continuing accommodating narrative had equities holding gains, while bond traders have been more inclined to sell in the face of a future inflationary environment, TIPS specifically.
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