(26 August 2020)
US stocks continued their march to new record highs this week as
investors look forward to tomorrow's keynote speech by Fed Chair Jay
Powell at the annual Jackson Hole Conference. Powell is expected to
announce a major shift in the Fed's inflation policy, most likely to
allow for more inflation through the notion of "average inflation". So
instead of keeping its strict inflation ceiling of 2% per year, the
Fed would temporarily accept higher rates of inflation without having
to raise interest rates. The higher limit for inflation is designed to
give the Fed more leeway in its various stimulus efforts, including
more QE (quantitative easing), active management of the bond yield
curve, and perhaps even buying stocks directly.
While this would be a major departure for the Fed, a similar approach
has been in effect with decidedly mixed results in Japan for 20 years as
that country has struggled to fuel any kind of economic growth and
inflation given its shrinking and aging population. Needless to say,
any hint of more QE is good news for the stock market as the trillions
of dollars handed out to banks and hedge funds invariably find their way
into riskier assets in search of a return.
Tomorrow's (Thursday Aug 27) speech could therefore move markets
significantly. If he announces new easing initiatives, then stocks
could well extend their climb. More upside in stocks would also likely
mean higher prices for gold and higher bond yields, as inflation
expectations rise. But if Powell only delivers the same message of an
"accommodative policy" without much in the way of new ideas, then stocks
could decline in disappointment or even as a 'sell the news' event
after the policy is announced.
One intriguing window on the Powell speech may be seen in his natal horoscope (Feb 4, 1953). No doubt, the Fed Chair is feeling under significant strain and a heavy workload as the Covid crisis drags on into its sixth month. The Mars-Saturn square aspect is currently aligning with his Saturn (4 Libra) through square and opposition aspects. Both Mars and Saturn are malefics and therefore reflect more difficulty during the time when their aspects are closest. Powell's Saturn symbolizes his responsibilities, restrictions, discipline and labor. The double affliction here suggests this is a highly stressful situation as he attempts to map out what will invariably be a controversial new policy.
But how will the market react? This is harder to say. The planets tomorrow are very mixed. Bullish Venus aligns with Jupiter and Neptune which could easily translate into more upside for stocks. However, I suspect that some of the gains we've seen already this week have been the result of the approach of this alignment so it is unclear how much of this energy is left.
At the same time, Mars and Saturn align with malefic Ketu and the Moon right at the time that Powell will be delivering his remarks in the morning. This suggests some negative fallout is very possible, even if it may not immediately affect the stock market. Since Venus and Jupiter may already have had their energies manifested this week, there is some added downside risk with the Moon highlighting this nasty Mars-Saturn-Ketu pattern. Overall, the planets here lack clarity and I would not be surprised by any outcome. But some caution is clearly warranted.
We can also see that the upcoming Mars retrograde station on September 9 will directly oppose Powell's Saturn. This suggest that whatever stress he may feel this week is likely to intensify in September. Moreover, Powell's Saturn is also aligned through minor aspects with his Rahu (19 Capricorn) and his Mars (4 Sagittarius). Therefore, the Mars station will align not only with Saturn but with his Mars and his Lunar Nodes (Rahu and Ketu). I would therefore expect Powell to come under intense pressure around that time. With Powell's chart coming under increasing affliction in the weeks ahead, it increases the probability of more uncertainty in the financial markets.
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