As we noted in our early-week playbook:
Doubt usually clears once Powell speaks and the market’s army of interpreters, subtext readers, and tea leaf analysts get to work. His tone matters — a lot — and it shapes how much risk participants are willing to take.
And so it played out. Once Powell’s tone was deciphered and the fog lifted, bulls stepped in with more conviction. It was white smoke — a go-ahead for risk-on sentiment.
Wait and See.
It was only a matter of time. Once Powell wrapped up his testimony, markets released the handbrake and got ready for the next leg up. As usual, some of his responses left room for interpretation, but one thing is now obvious: the standoff between the Fed and Trump will be a drawn-out battle.
What does this mean? That the Fed isn’t willing to fold or throw Trump a lifeline by pivoting back to QE. The “data by data, meeting by meeting” mantra will be stretched further, with laser-focus on employment and inflation. Nothing new, really — this latest FOMC could have taken place a year ago, and we wouldn’t have noticed the difference.
But one thing should be crystal clear: we must not overestimate the role of economic data in market moves. The data is the excuse — behind rate cut decisions lie political motivations. With Trump and Powell on opposite ends of the political spectrum, Powell won’t just wait — he’ll pay to see.
Feeling the euphoria? We’re not.
One thing we’ve always tracked closely is sentiment, especially after price breaks out and we see fear flip suddenly into extreme greed. It’s not just a fascinating reflection of human nature and the power of collective emotion to move markets — it also tells us whether a trend is sustainable.
When sentiment shifts too violently from bearish to euphoric, trends usually don’t last. What we often see is a reversal that traps late bulls, who entered at the top, and leaves them panicking as their positions sink in bearish quicksand.
So what are we seeing now?
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