"The Dow Jones (US30) has continued its recovery in recent sessions, primarily supported by expectations that the Fed will soon begin a rate-cutting cycle. Following the Jackson Hole symposium, Fed Chair Jerome Powell's remarks reinforced the view that the Fed is becoming more cautious about rising risks in the labour market, while leaving the door open for policy easing if economic data continues to weaken."
"This "cautiously dovish" signal has strengthened confidence that U.S. monetary policy is gradually shifting, thereby providing momentum for U.S. equities in general and the Dow Jones in particular. With interest rates potentially set to decline, equity sectors sensitive to capital costs-such as financials, industrials, and consumer discretionary-are expected to benefit significantly. At the same time, the energy sector may also play an important role if oil prices remain elevated, supporting profitability within the industry."
"Nevertheless, the short-term outlook for the Dow Jones still faces multiple risks. Markets are awaiting the release of preliminary U.S. GDP and core PCE inflation-two key indicators that could directly influence the Fed's September policy decision. Should the data confirm slowing economic growth and easing inflation, expectations for rate cuts would be reinforced. Conversely, any upside surprises could trigger a rebound in bond yields, increasing pressure on equities."
The Dow Jones has resumed its recovery as markets price in an upcoming Fed rate-cutting cycle. Jerome Powell's Jackson Hole remarks signaled increasing caution about labour-market risks while leaving open the option of easing if data weakens. The resulting cautiously dovish outlook supports U.S. equities and favors rate-sensitive sectors such as financials, industrials, and consumer discretionary. Elevated oil prices could bolster energy sector profitability. Defensive sectors like consumer staples and healthcare continue to stabilize the index versus more cyclical benchmarks. Short-term risks include upcoming preliminary U.S. GDP and core PCE readings and rising trade tensions after U.S. tariffs on Indian imports.
Read at London Business News | Londonlovesbusiness.com
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