Powell is no Bernanke

Jerome Powell is a lot more easily influenced by Fed media coverage than either Bernanke or Yellen.  How often did you see Bazooka Ben and Yellen backtrack on their statements because they were too hawkish to please the markets?  They rarely had to.  Bernanke was just an over the top dove and a horrible Fed chairman, so he never had to take back his words.  After all, market participants only complain if the Fed causes the markets to go down by being too hawkish.  Being too dovish is ignored, just water passing under the bridge.  Yellen made one miscue about timing of Fed rate hikes at the beginning of her term, the media complained, and after that, she took the easy way out and became overly dovish, pleasing the markets by dragging out the beginning of the rate hiking cycle way too long. 

On the other hand, Jerome Powell actually seems to try to tamp down the animal spirits from time to time.  And market watchers hate it, because it causes the markets to go down.  Yesterday was one of those times he tried to pull back the punch bowl.  They call it miscommunication.  No, its not miscommunication.  Its idiots who still think that all Fed chairman are supposed to be like Bernanke and are surprised and disappointed when they don't get everything they want and more. 

Bernanke would ALWAYS promise lots of goodies and then overdeliver!  So it led to some inane monetary policy decisions, like QE2 and QE3, with the length and amounts of bond purchases for QE2 longer and bigger than the market expected.  Same with QE3.  He was a knucklehead who was scared of his own shadow, who saw a Great Depression around every corner. 

Bernanke's 8 year reign of free money distorted Wall Street expectations of what the Fed would do during its meetings.  That's why the Eurodollars were so grossly overpriced during Yellen's reign in 2016 and 2017, because the markets just didn't expect the Fed to come through with the rate hikes because it always kicked the can under Bernanke, and under Yellen, she delayed hikes at the slightest bit of market turbulence, (even a 5% correction in the SPX would stop them in their tracks! (March 2015). 

When Powell came on in 2018, he sent a strong message to Wall Street, and it was often ignored.  He would talk up the economy, calling it solid, pushing in rate hikes and continuing QT as promised even when the markets had a tantrum a few weeks prior (Tantrum: February 2018, hike: March 2018.   Tantrum: April 2018, hike: June 2018, Tantrum: October-November 2018, hike: December 2018).  He was the first Fed chairman since Volcker who actually followed through on his rate hiking plans and didn't water it down or slow it down, due to market weakness. 

So when he finally relented to the pressure and admitted that he got too hawkish and the market got too weak, the stock market celebrated by going up in straight line for 4 straight months! 

With backwards looking economic data showing strength in July, Powell was running out of good excuses to cut, so it showed in his press conference.  He was stammering to find the right words to match his actions, because he was basically cutting rates because the financial markets put a gun to his head and forced him to. 

Unlike the super doves that preceded him, he has a conscience, and is affected by the media criticism of the Fed bowing down to Trump, being servants to the stock market, not being data dependent anymore, etc.  And there was a lot of critics of his dovish words and his rate cut hints even though nonfarm payrolls came in strong and the SPX was at an all time high.  The media pressure got to him, and he didn't want to sound too dovish.  Now the media will criticize him for miscommunicating his policies, which is another way of saying you caused the stock market to go down. 

The financial media is a joke, and can't be taken too seriously.  It talks out of both sides of its mouth.  What we have found out though is that if the SPX keeps going down, eventually Powell will relent and signal more rate cuts.  The stock and bond market has an iron grip on his balls.  If he's too hawkish, they will squeeze hard, and only let go until he turns dovish again. 

The SPX is in a vulnerable place, what Powell said yesterday wasn't even newsworthy in my opinion, but with great expectations come disappointment.  And yesterday's price action is what happens when markets are disappointed.  I expect the disappointment to last a few days before the next rally attempt.  In any case, I am more interested in adding to my short position on the next rally attempt.  Yesterday was just a sneak preview of bigger things to come in September and October.