Was That Another Powell Bottom?

Powell was confirmed on Thursday, and US stocks bottomed just minutes later, and as of this writing are more than 4% higher. The almost 20% bear market experienced this year is similar to the one in late 2018 the last time Powell faced a political crisis. Now confirmed, he can dial back the politically necessary ultra-hawkish rhetoric. An interview on Thursday showed no evidence of that, but it seems it was made before the confirmation vote. Powell's current thought process implicitly assumes that inflation is permanent unless the Fed slows the demand side of the economy. This is a doom-loop with China's lockdowns and the war in Ukraine already slowing growth, but creating scarcities driving higher statistical inflation at the same time -- inflation that will happen no matter what the Fed does. The S&P 500 equity risk premium got almost back to its post-GFC mean at the lows on Thursday. There are lots of risks out there, and Powell's conversion is not proven. But it's a sensible time to at least start reallocating back towards risk and growth.