Investment Idea

Hole in one in Jackson Hole – hedging equities with US dollar

Carlsquare

25 Aug 2022 | 1 min read

Equity markets are quite on the edge as investors are waiting to see just how hawkish chairman Jerome Powell will be at the annual Fed conference in Jackson Hole this Friday, August 26th.

Last year at the annual conference, Powell took the stance that inflation might prove to be a temporary phenomenon, driven by short-term effects following the pandemic shutdowns. Since then, the Fed’s view on inflation has changed. Markets are expecting Powell to address their outlook on Friday.

The big question is whether the Federal Open Market Committee will go ahead with heightening rates by another 75 basis points (bps) in September to counter inflation. Powell’s speech is expected to be highly indicative of what move the feds will make.

An aggressive rate increase will punish equity markets and strengthen the US dollar as the money supply decreases. Hedging the equity portfolio ahead of the conference with the US dollar might offset some expected short-term equity volatility.

Source: Infront and Carlsquare. Note: Past performance is not a reliable indicator of future results.

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The full name for abbreviations used in the previous text:

EMA 9: 9-day exponential moving average

Fibonacci: There are several Fibonacci lines used in technical analysis. Fibonacci numbers are a sequence of numbers in which each successive number is the sum of the two previous numbers.

MA20: 20-day moving average

MA50: 50-day moving average

MA100: 100-day moving average

MA200: 200-day moving average

MACD: Moving average convergence divergence

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