Federal Reserve Chair Jerome Powell just gave Wall Street—and Main Street—a reason to celebrate.
- IWM ETF rallied after Powell’s remarks.
In a closely watched speech at the Fed's annual Jackson Hole conference, Powell sent a clear signal that the central bank is preparing to shift its stance on interest rates as early as next month.
His message was dovish enough to spark a broad market rally and a wave of predictions from top economists: rate cuts are no longer a question of if and when, but how many.
"The baseline outlook and shifting balance of risks may warrant adjusting our policy stance," Powell said.
In simple terms, the Fed is laying the groundwork for a September rate cut.
Markets React Instantly: Stocks And Crypto Rally
Stocks surged on Powell's tone shift.
The Dow Jones jumped 2% to new all-time highs above 45,680, while the S&P 500 – as tracked by the Vanguard S&P 500 ETF (NYSE:VOO) – climbed 1.4% and the Russell 2000 soared nearly 4%, marking its best session since April.
Bond yields tumbled, with the 2-year Treasury falling 10 basis points to 3.70%, as traders moved to fully price in a 25-basis-point cut in September.
But the crypto market stole the spotlight, erupting into a full-blown risk-on frenzy as rate cut bets intensified. Bitcoin (CRYPTO: BTC) jumped 3.5%, while Ethereum (CRYPTO: ETH) , Solana (CRYPTO: SOL) and Cardano (CRYPTO: ADA) soared with double-digit gains.
A Wave Of Cuts Is Coming, Economists Predict
Economists across Wall Street interpreted Jerome Powell's Jackson Hole speech as a major pivot—and possibly the first domino to fall in a broader shift toward rate cuts.
Jan Hatzius, chief economist at Goldman Sachs, didn't mince words: "We see Powell's remarks as consistent with our expectation of a 25bp cut at the FOMC's September meeting."
For Goldman, the Fed now has enough cover to begin easing, especially as the labor market continues to cool faster than expected.
"Powell delivered," LPL Financial economist, Jeffrey Roach, said. He noted that capital markets will welcome this updated tone, as the Fed now seems more focused on real-world data than backward-looking inflation fears.
David Laut, chief investment officer at Abound Financial, believes Powell gave investors what they've been waiting for.
"Given the recent slowdown in the labor market, the Fed has enough data under its belt to justify a September cut," he said.
Laut added that one more employment report could seal the deal, but the groundwork is already there.
Chris Zaccarelli, chief investment officer at Northlight Asset Management, called Powell's message "unexpectedly direct" in Fed-speak.
"He didn't say it outright, but Powell clearly signaled the Fed is ready to cut interest rates at the next meeting," Zaccarelli said. In his view, the bar is now very high for the Fed not to cut in September—unless incoming data dramatically improves.
Paul Stanley, chief investment officer at Granite Bay Wealth Management, echoed the sentiment but left the door open for something larger. "Whether it's 25 or 50 basis points is still unknown," he said, "but the fact that the Fed is even entertaining cuts again is undeniably bullish for stocks."
For Ryan Sweet at Oxford Economics, Powell's speech changed the timeline.
Sweet now expects not just one, but two rate cuts before year-end, with the first likely coming in September instead of December. He sees this as a clear break from previous Fed messaging, which had focused squarely on inflation.
According to Sweet, Powell is now tilting toward the employment side of the mandate.
And for those watching the technicals, Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report, sees opportunity. "Today's comments were more dovish than expected," he said.
Tentarelli expects homebuilders, small caps, and regional banks to benefit the most, all of which rallied sharply on Friday. "This is the kind of macro shift that changes sector leadership," he added.
Why This Matters For You
When the Fed cuts rates, the impact trickles through every part of the economy: mortgages become cheaper, credit card APRs decline, and borrowing becomes easier for businesses and consumers alike.
That means more spending, more investment—and for equity markets, more upside.
For everyday investors, Powell's pivot could mean a new window of opportunity. Rate-sensitive sectors like housing, regional banks, and small caps tend to outperform when monetary policy shifts from restrictive to accommodative.
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Image created using artificial intelligence via Midjourney.
