Actions taken by the Federal Reserve and comments from the Fed chairman affect markets. The sharp rally from the March low is due, in part, to the extraordinary measures taken by the Fed.
In Congressional testimony this week, Fed Chairman Powell said the Fed is “committed to using our tools to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible.”
Powell noted that about half of all jobs lost have come back, and consumer spending is up about three-quarters. He added, “The economy is healing.”
There are two terms that are used to describe sentiment from Federal Reserve officials – dovish and hawkish. Dovish describes a Fed that is less worried about inflation and more worried about jobs. Doves are less likely to raise interest rates. Hawkishness is the mirror image.
Since bottoming on March 23, the S&P 500 Index has advanced an impressive 60% through its most recent peak on September 2 (St. Louis Federal Reserve data). This includes an advance of over 7% in August, the best August in 34 years.
Aided by strength in the tech sector and the ‘stay-at-home’ companies, the Nasdaq Composite’s performance has been even more impressive: +75.7% (Yahoo Finance).