The most important agenda of the week globally was the Jackson Hole event and Powell's speech. FED Chairman Jerome Powell stated in his speech at the Jackson Hole Economic Policy Symposium that the slowdown in the employment market indicates normalization and that the current interest rate level provides the necessary space. Powell said, "It is time to adjust monetary policy. The data ahead will determine the pace and amount of interest rate cuts." Powell signaled a rate cut for September. Now, will it be 25 basis points from now on? I had said that slowed-down interest rate cuts were good. The sad thing is that Powell's dovish statements on Friday created tremendous volume all over the world. There was serious buying in stock markets. There was a serious attack even in crypto, which has been tiring for a long time. I expect the continuation.
Powell stated that inflation has fallen significantly and that they are getting closer to their inflation targets. He also emphasized that inflation expectations are firmly anchored and that they do not expect a major deterioration in the employment market. Powell, who stated that the disinflation process can only be successful by anchoring inflation expectations, drew attention to the fact that demand has shifted back to the service sector. Powell spoke quite dovishly at Jackson Hall last week. This of course makes overly skeptical macroeconomists think. In other words, is the employment market so bad? He spoke so dovishly. Because we thought his tone would be more careful. When he was overly dovish, of course, he was like a leader who had declared victory against inflation. Therefore, in the end, words fly away and words remain, the real binding official things are the things said in the meetings. Because when they are put into written documents, very different things can come out, and there were also very dovish statements in the minutes last week.
Therefore, my expectation is that there will be a rate cut before the election. I think that the Democrats want to enter here as strongly as possible with a strong economy. Kamala Harris, because she has slowly started to gain an advantage over Trump in the polls, which is also above my expectations. Therefore, they have been adjusting the move here accordingly for months. It is completely political, I think it has happened as I expected. There will be a rate cut in September. Only here, 25 basis points or 50 basis points is important. If you ask why, when we look at the performance of S&P 500, it has achieved quite positive returns in slow interest rate cuts. I think it will be quite positive if it starts with 25 basis points.
But if it starts with 50 basis points, we will have to be a little more careful in the stock markets in the upcoming period in terms of interest rate cuts. This week, because they made a revision in payroll, namely the employment market data, and they actually determined that the employment market is in a much worse condition than they thought. This revision is the worst revision since the financial crisis in 2008, there is a number below 800 thousand. In other words, it is a serious revision. Therefore, if the employment market and interest rate cut momentum are followed well in the upcoming period. If employment, especially unemployment data, starts to increase rapidly and if the interest rate cut is 50 basis points instead of 25 basis points, as I mentioned earlier, we need to be careful.
Referring to past developments, Powell stated that they observed a gradual decline in core inflation from April to September 2021, but supply chain problems, increases in energy prices, and restrictions in China increased inflation. Powell recalled that two years ago they predicted that fighting inflation could increase unemployment and lead to a recession. However, he stated that inflation had peaked and unemployment was at historically low levels as of July. Powell emphasized that the Fed's monetary policy had reduced inflationary pressures and ensured that healthy growth continued, and that the necessary adjustments were made to long-term monetary policy targets.
Federal Reserve (Fed) Chairman Jerome Powell's statements at the annual economic conference in Jackson Hole, emphasizing that interest rates should be lowered, created a positive atmosphere in the markets and caused the indexes to gain upward momentum. Following these developments, the S&P 500 index on Wall Street managed to approach the record level it reached in July again. The index, which fell 9.7 percent in July, is on track to make up for those losses and is less than 1 percent away from reaching a record. While 1 percent increases in technology giants Meta and Amazon stocks supported the S&P 500, chipmakers Nvidia and Broadcom stocks rose more than 3 percent.
I mentioned a bear trap in Nasdaq last week. They broke down and picked up the trend again, now there is no problem on the Nasdaq side. Of course, the most important event in terms of global markets this week is Nvidia's balance sheet. AMD did not do badly, and Nvidia's expectations are positive so far. I don't see a problem as long as Nvidia stays above $124-125. Trouble begins below $120. Therefore, the implied volatility in the balance sheet coming this week will be around 9-10% high volatility. A movement of approximately $300 billion in a stock of $3 trillion is an incredible figure in one day. Therefore, the fate of many risky markets will be determined with the balance sheet that will come after the session closes on Wednesday, the 28th. I am a little closer to a positive balance sheet and upward movement here. In other words, the current general picture is interest rate cuts and corrections have been made. At least until we see a clear deterioration in the employment market, I think it will push us upwards.
Last week, I mentioned the weakening in the dollar index. After Powell's interest rate cut statement in particular, DXY weakened as we expected in Jackson Hall, suffered a huge sell-off, and they pulled the plug on the dollar. Of course, this has been on the agenda for a while for the euro and pound, as well as the Japanese Yen and the Swiss Franc. In other words, I think everyone involved in trade should learn about this DXY incident. In short, this decline in the dollar index may be a reaction this week and they will squeeze the market a little. But I think this weakening will continue in the coming period. I continue to have positive expectations for other parities.
Gold has once again broken a record. In transactions made on Tuesday, gold reached a peak of $2,531 per ounce. The return since the beginning of the year has been over 25%. According to data from the World Gold Council, the assets of physical gold-backed ETFs have increased by 90.4 tons since May, reaching $7.3 billion. Net inflows have been positive in seven of the last eight weeks. The ounce of gold strengthens above 2520. The ounce of gold will continue to act as a safe haven in the coming period due to factors such as the weakening of the US economy and interest rate cuts. Only this week, there is a report from Bank of America saying buy gold despite high prices. Generally, after large institutions write reports that use such extremely bullish and overly ambitious expressions, a correction may come. Although I have a positive target towards $3000 in the medium and long term, it seems like there may be a possibility of such a correction in the short term. We need to be careful.
There are three developments supporting gold. The first is the geopolitical tensions in the Middle East. Although the tension has eased a little in recent days, the uncertainty between Iran and Israel continues. The second is recession concerns. Gold is a commodity that has historically protected its investors by acting better in recession periods. Therefore, there is demand for gold after the data coming at the beginning of the month. Finally, the third and perhaps the most important one since it is an expectation pricing is the expectation that the Fed will start reducing interest rates in September. The most bullish scenario for gold, which does not yield interest, is a rapid interest rate reduction cycle.
There is an inverse correlation between gold and the dollar, except for financial anomalies. The reason for this is related to US interest rates. When interest rates rise in the US, this causes capital inflows into US Treasury bonds, known as the most reliable instruments in the investment world, and the dollar strengthens. If the increase in nominal interest rates continues to remain above inflation in real terms, the opportunity cost of holding gold increases and gold prices are expected to fall. However, exceptions to this situation have been seen in the past. This inverse correlation usually breaks down in periods of financial stress, because investors turn to both gold and the dollar as safe havens.
If Bitcoin goes to around 69,000 - 70,000 up to Nvidia's balance sheet and does something like a coiling there, which they call a pennant, and if Nvidia's balance sheet is particularly positive, there is a possibility that it will break 70,000 on the 28th. But I think 70,000 will be important there. This week we will visit around 69000 - 70000. There, depending on the state of the global markets, we will either continue upwards or make a further correction from there.
They don't want Brent oil to go down too sharply right now. That's why I think there will be an upward reaction this week. It's good that they hold on to this, especially in terms of stock markets. However, the picture I see as negative is the negative in the big picture. But I've been seeing this for a year. If it starts to go down sharply, we need to be a little careful. Because there are serious problems with demand, especially growth, on the Chinese side. We can't get healthy information from China about the housing sector. But most recently, one of the world's largest steel producers said that 2025 would be difficult, and that the recessionist, deflationist shock waves there could affect the world. That's why I think it's a little more oil-oriented in terms of global growth, even though they measure the healthy functioning of the global economy with copper, I find oil healthier and more rational. That's why I'm especially watching oil. I expect a reaction in oil this week.
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