In this article, the author discusses the recent change in market sentiment following Federal Reserve chair Jay Powell’s press conference. The author notes that the mood had been pessimistic due to increasing long-term interest rates and inflation, but Powell’s comments seemed to ease concerns and led to a significant drop in the 10-year yield. As a result, stock prices rose, with small and lower-quality tech stocks experiencing a strong rally. Additionally, regional banks also saw an increase in value, indicating investor expectations for relief on interest rates. However, the author cautions that while markets may interpret Powell’s comments as a signal that the rate increase cycle is over, economic data still suggests some uncertainty. For example, recent jobless claims have increased, and the ISM manufacturing PMI for October came in below expectations. The author argues that it’s important to consider all economic data and notes that a market convinced the central bank is done puts itself at the mercy of future data. Furthermore, the author highlights potential concerns such as rising term premiums, high oil prices, and Treasury oversupply that may still impact markets. Overall, the article suggests that while there may be optimism in the market, it’s important to remain cautious and monitor economic data and other factors.
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