Fed chair Jerome Powell struck a dovish tone at the Jackson Hole symposium Friday, signalling a shift in policy focus toward supporting a softening labour market, rather than preemptively tightening to curb inflation.
While he did not explicitly commit to a rate cut, his remarks were seen as opening the door to a potential reduction in interest rates as soon as the September meeting.
The shifting balance of risks may warrant adjusting the policy stance.
The remarks sent a wave of optimism through Wall Street, with the benchmark S&P 500 index and Dow Jones Industrial Average both hitting record highs on Friday.
According to Fundstrat’s chief investment officer, Tom Lee, Powell’s speech is essentially a green light for risk assets, particularly small caps and cyclical sectors, which have lagged in recent weeks amid defensive positioning.
Why Powell’s remarks bode well for US stocks
Speaking with CNBC today, Tom Lee said Powell’s pivot marks the return of “dovish Fed”, which could unlock significant upside for US stocks.
He noted that mortgage spreads remain historically wide, suggesting room for rates to decline and stimulate housing and financials.
According to the globally renowned strategist, the Institute for Supply Management (ISM) index, which has been under 50 for some 30 months, may also rebound – signalling industrial recovery.
Lee now expects a broadening rally across sectors to see the benchmark S&P 500 index hit as much as the 7,000 level by the end of this year, indicating potential upside of another 8.0% from here.
What to expect from tech stocks after Jackson Hole
Despite the shift toward cyclicals, Tom Lee remains bullish on technology – particularly artificial intelligence (AI) stocks and blockchain-related plays.
“You want to be long AI and the crypto trade because those have been the market leaders,” he said.
The so-called “Magnificent Seven” names – Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, and Tesla – continue to anchor investor sentiment.
Lee emphasized that while defensives may lag, tech remains a core holding. “It’s kind of cyclicals, AI, and crypto but not the defensives,” he added.
With improving growth expectations and a dovish Fed, tech stocks could see renewed momentum, especially those tied to innovation and digital infrastructure, Lee told CNBC today.
What to expect from Ethereum after Jackson Hole
On Friday, Tom Lee also made a strong case for Ethereum, likening its current moment to the US dollar’s departure from the gold standard in 1971.
“Wall Street moving on to the blockchain is a bigger moment,” he said, pointing to the GENIUS Act’s support for stablecoins and Project Crypto’s push to integrate blockchain into financial systems.
Lee believes Ethereum (ETH) will be central to future smart contract infrastructure – especially in verifying human commands in agentic AI systems. “A lot of it will be Ethereum,” he said.
While some dismiss crypto as speculative, Lee argues its foundational role in the next wave of financial innovation makes it a long-term winner.
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