[Market Watch] Federal Reserve Chairman Jerome Powell on Aug. 27 gave stock investors the green light to throw more money at the market.
In a virtual speech to the annual Jackson Hole monetary policy conclave, Powell declared that the central bank would allow inflation to rise above 2% if that followed a period of persistently low inflation, essentially abandoning its longtime target.
Powell only codified what the Fed has been doing since COVID-19 sent the U.S. economy into the deepest recession since the Great Depression: Cutting interest rates to zero and engaging in trillions of dollars’ worth of securities purchases to shore up shaky markets, and stimulate the economy and job creation.
That speech and continued hopes for a vaccine and an economic recovery pushed the S&P 500 Index SPX, -0.21% and Dow Jones Industrial Average DJIA, -0.78% higher that day and again Friday.
One leading market guru thinks we’re just getting started. Sam Stovall, chief investment strategist for CFRA in New York, says that, based on history, the new bull market that emerged from the February-March COVID bear market could last three years. By one model, he says, that could take the S&P 500 30% higher, which would put it around 4,500 points in 2023. (Stovall has not published an official projection for 2023.)
Stovall, who’s been a market analyst and strategist for over three decades, bases his projection, in part, on sunny forecasts from his firm’s economists, who see a V-shaped economic recovery on the horizon. (He says they called the 32.9% second-quarter GDP decline almost to the percentage point.)
Speaking to me last week before Powell’s remarks, Stovall explained how rock-bottom interest rates shape his forecast. |