Powell Fires up Printer, Israel vs Hezbollah Battle Escalates

Powell's speech has re-ignited excitement in stocks and gold, meanwhile, the Israel/Hezbollah situation has just seen its largest escalation in over a decade. It looks like the path to easy money is back and inflation is no longer on the Fed's radar. The new biggest risk appears to be continuous war escalation.

Jerome Powell gave a dovish speech in Jackson Hole on Saturday morning, and it was exactly what markets wanted to hear. Rather than saying as little as possible, he addressed concerns and said, 'The time has come for policy to adjust'.

Powell reassured the audience that it looks like 2% inflation will be reached and the labour market can remain strong simultaneously. His comments seemingly cemented the idea that inflation will no longer be an issue that the Fed is monitoring. He said that cooling off in the labour market is unmistakable. He also said that they 'will do everything we can to support a strong labour market as we make further progress toward price stability.' This looks like any changes in the size of rate cuts will be based on jobs data and not inflation data.

U.S. stocks and gold have shot upward on the back of these comments. Easing policy lessens the chance of an imminent recession and supports confidence in stocks. It also means a further destruction of the currency, an opportunity to move to gold.

Israel, Hezbollah

Israel conducted a pre-emptive attack in Lebanon yesterday. Israel used 100 fighter jets to attack missile launching equipment to neutralise Hezbollah's offensive capabilities. This made Hezbollah's delay in attacking become a serious miscalculation. Hezbollah responded by firing hundreds of missiles at Israel.

The term 'all-out war' continues to describe the risk in recent escalations. The leader of Hezbollah said that the missile attacks have ended for now, but they reserve the right to respond if they decide that the previous strikes were not sufficient.

The news of this escalation has yet to be seen by safe haven markets, such as gold and silver, which, as we’ve seen in the past often leads to a rise in the price of these real assets due to geopolitical uncertainty.