At last week's Federal Reserve Symposium in Jackson Hole, there were no surprises.
• The tech sector may face pressure, while gold and silver may rally.
• The Chinese economy is beginning to show weakness.
Last week, everyone was eager to hear what Jerome Powell, the Chairman of the U.S. Federal Reserve, would say at the Jackson Hole symposium. Investors were most concerned about whether he would once again make cautious "hawkish" statements.
In the opinion of many, that's exactly what his speech was, although in reality, it wasn't quite so. In truth, investors shouldn't have expected much because easing concerns about inflation could be a risky move.
Powell's speech, of course, was touted as a key event, and although the Fed Chairman tried to convey a strong message, there was nothing truly new in his speech.
In essence, its content can be summarized in one simple sentence:
"Our goal remains to achieve and sustain inflation at 2%."
There's nothing revolutionary about this, which is why market reaction to the speech was fairly restrained compared to expectations.
As of today, the probability of a rate hike in September is estimated at 20%, and in November, it's roughly 45%.
It seems like the Fed has forgotten 2020. In that year, it was the central bank that triggered inflation with its "helicopter money."
Now, the regulator is focused on reducing inflation. It's possible that the Fed and other central banks will indeed achieve their goal and achieve deflation.
Tech company stocks are trading near key resistance levels
Technology company stocks in the S&P 500 index showed growth at some point in 2022, up by 29%, but from late 2022 to early 2023, their prices declined.
The share of the top 7 companies in terms of market capitalization in the S&P 500 (% of total market cap)The share of the top 7 companies in terms of market capitalization in the S&P 500 (% of total market cap)
However, recently, these stocks have shown a recovery, regaining dominance in the index, with their share of total market capitalization reaching around 28%.
Currently, the technology sector (NYSE: XLK) seems to be facing challenges, as stocks are trading below the previous cycle highs.
Interestingly, a similar candlestick pattern has appeared on the chart as the pattern in 2021, which triggered a correction of more than 30%.
Nevertheless, when looking at the overall picture and assessing the potential for further declines, it can be assumed that the sector will not fall below the $140 range.
Gold and silver poised for a rally?
Meanwhile, we are closely watching silver and expecting it to rise. If silver prices suddenly surge, a rally can also be expected in the gold market.
These two metals are usually closely correlated, but silver often outperforms gold.
Just recall 2022. Gold prices started to rise at the end of the year and by May 2023 had reached highs between $1800 and $2000 (the highest since March 2022).
Silver, during the same period, outpaced gold by more than 30%. Prices rose from the low recorded in October 2022 to yearly highs of $25.681 by May 2023.
Afterward, investors began shifting their funds from precious metals to other assets.
The silver-to-gold ratio now stands at 0.013, which is significant, as this level corresponds to a key turning point of the last decade, where prices reversed during "bullish" cycles. If silver prices break higher, it will be a purely positive development for both metals, as they often influence each other. Speaking separately, silver maintains a strong support level at $22.550. It's worth noting that this doesn't signify a downward trend.
Perhaps this time, a fresh rally in silver can provide the necessary impetus for gold prices to surpass previous highs, especially the resistance level of $2070.
There is an analogy with the devaluation of August 2015. Those events not only roiled global financial markets but also triggered a sharp rise in Bitcoin, as liquidity poured into it.
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