Why is the stock market down today? I finally heard Jerome Powell’s message loud and clear.

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Jackson Hole It came and went, and the only surprise might be that Stock market surprised.

But surprisingly it was. The stock market last week started in full swing, an apt response as investors seemed to realize that they might have overestimated the chances of a downbeat Fed. after market take back the earth With Friday’s meeting approaching, investors bought the dip. then, President Jerome Powell started talking. He told seminar attendees that the Fed needs to get inflation back to its 2% target, that doing so will take time, and that another big rate hike is likely in September. A speech that could have lasted 30 minutes only took 10 minutes.

“Fed Chairman Jerome Powell’s speech today at Jackson Hole was short and tough,” wrote Ed Yardeni, senior investment analyst at Yardeni Research. He has canceled any remaining forecasts from the Fed pause tightened It may cut interest rates next year.”

Has he done this before, and the markets haven’t missed the message. The Dow Jones Industrial Average was down 3% on Friday and closed the week 4.3% lower, while the Dow Jones Industrial Average was down 3% on Friday.

Standard & Poor’s 500

The index fell 3.4% to close the week down 4%. It was their worst week since June.

It’s not that investors are worried about what will happen at the next meeting. according to CME FedWatch ToolIn the futures market, the futures market had a 61% chance of a three-quarter point rate hike after Powell spoke on Friday, down from 64% the day before. The real fear seems not to be about the size of the next rally, but when the rallies stop and how long prices stay high – even if it means causing a recession. “[We] You don’t think the central bank is ready to “pivot focus” now, wrote Thomas Matthews, markets economist at Capital Economics. We believe that this means that the central bank will remain a headwind for the markets for a while.

Especially for expensive growth stocks. It should come as no surprise that a high-tech person

Nasdaq Composite

Bearing the brunt of the damage, it fell 3.9% on Friday to end the week down 4.4%. This makes sense, given that Expensive growth stocks They are most sensitive to rising interest rates, stocks like

nvidia

(Stock ticker: NVDA) and

trade office

(TTD), which is trading at 42.7 and 57.9 times earnings respectively, is still not cheap.

However, investors don’t seem to be leaving it. According to Goldman Sachs data, mutual funds carried growth on equity trading equal to 20 times the institution’s value/sales or higher during the second quarter of the year. This means adding stock like

snowflake

(Snow), Bureau of Commerce, and Nvidia, among others. That worked well while spinning off the June low, but could be especially painful if the Fed were to raise interest rates higher than investors expected. “Long-term” sub-sectors and stocks are hardest hit, wrote Chris Sinek, strategist at Wolff Research.

There may be a tough road ahead from now to the Fed’s next meeting on September 2.

write to Ben Levisohn at [email protected]