The Jackson Hole Pivot

Investment Conclusion

What Chair Powell's newly announced policy means for investors:

More asset bubbles in equities, crypto and non-bank credit;
Higher inflation down the road as the money will be printed to fund it;
Bond markets may rejoice momentarily but not for long. In one year US 30yr Treasuries will yield 6%.
A weaker US$ based on relative interest rates basis but with capital inflows to capture asset bubbles being US$ neutral as capital inflows will be hedged.

The Jackson Hole monetary policy switch may allow the Fed to dodge some of the Trump administration's war against its independence. After all the FOMC will now be running with Trump Administration pack - at least in the direction of interest rates. But it will not lessen the Administrations campaign to force FOMC resignations and to fill vacancies with its own sympathisers. The threatened loss of Fed independence remains a negative for the US$.

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