Markets on edge as Evercore warns - Powell's Jackson Hole speech could spark a shocking 15% plunge
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Stock market risks and Evercore's advice
Hold a core portfolio of 'AI Enablers, Adopters, and Adapters' in tech, consumer, and communication sectors. Examples: Amazon (AMZN), Alphabet (GOOG), Micron (MU).
Add healthcare stocks with good earnings revisions, like Pfizer (PFE) and Cigna (CI).
Fund these buys by selling expensive stocks with weaker outlooks, such as Palantir (PLTR), Tesla (TSLA), and MicroStrategy (MSTR).
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U.S. federal reserve chair Jerome Powell is expected to signal a drop of 25 basis points during his expected speech at the annual Jackson Hole meeting of the who's who of central bankers on Friday in Wyoming. Analysts at Julian Emanuel led Evercore ISI say the indication of the drop in rate could be the precursor to the real announcement during the Fed's mid-September meeting.Investors wanted a 50 basis point cut (half a percent). Evercore warned that Powell's 'balanced view' could trigger a 7% to 15% market drop by October. Economic Outlook Looks Unclear – Evercore said both parts of the Fed's job – controlling inflation and keeping jobs strong – look 'muddled', as reported by Investopedia.July's Consumer Price Index rose less than expected, but wholesale prices increased faster than forecast. Jobs Market Data Also Mixed – Weekly jobless claims stayed steady this year. But U.S. job growth slowed to its weakest 3-month pace since 2010 (excluding the pandemic shock). Back in 2010, the unemployment rate was 9%, double today's level.President Donald Trump has criticized Powell since returning to the White House in January. He wants the Fed to cut rates more deeply. Trump's Move Sparks Worries – In early August, Trump fired the Bureau of Labor Statistics chief after a weak jobs report. Economists fear this could lead to political interference in economic data, as per the Investopedia.Evercore noted that high stock prices and seasonal weakness are dangers. September is historically the worst month for stocks, even after strong rallies. Wall Street Rally Context – Stocks have been lifted by trade deals and strong earnings, but valuations are now close to the Dotcom Bubble levels.Evercore made clear that Powell's speech could be a turning point: if markets don't like what they hear, a sharp 15% drop could hit by October, as stated by Investopedia.Powell is expected to signal a 25 basis point rate cut at the Fed's September meeting.Yes, Evercore warns that markets could fall 7% to 15% by October if investors don't like his message.
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