Powell Hints at Cuts, Tariffs Bite, Gold Shines

Key Takeaways

1. Fed pivot – Powell signaled a September rate cut at Jackson Hole, sending markets higher, but Fed independence took a hit after Trump fired Governor Lisa Cook.

2. Central banks abroad – ECB held rates steady while the Bank of England cut despite hotter inflation, showing policy confusion on both sides of the Atlantic.

3. Trade tensions – U.S. slapped hefty tariffs on metals and India while signing a new EU deal; China got a temporary 90-day tariff truce.

4. Commodities diverge – Gold hit $3,374 (+30% YoY) as investors ran for safety, while oil hovered around $65 amid Ukraine ceasefire speculation.

5. Corporate resilience – U.S. retailers like Home Depot held up well despite tariff headwinds, and AI regulation in Europe signaled rising costs but stronger moats for Big Tech.

The big headline this week was Fed Chair Jerome Powell hinting at a September rate cut during the Jackson Hole gathering. Yes, the same Powell who has been slow dancing with inflation for months now seems ready to bring out the scissors. Markets threw a party—Dow up 850 points in a single day. Investors love cheap money almost as much as they love pretending they’re long-term thinkers while chasing short-term rallies.

But hold your horses, because politics shoved its way into the Fed’s house. President Trump fired Fed Governor Lisa Cook on August 26. Nothing says “independence” like firing people who disagree with you. This move made people wonder if central bank credibility is going the way of Blockbuster. It’s worth remembering that, as Buffett would say, markets are built on trust—and trust is a lot harder to rebuild than to destroy.

Across the pond, the European Central Bank is holding steady at a 2% deposit rate. They’re basically sipping coffee and waiting for the storm clouds of trade disputes to either pass or turn into a hurricane. Meanwhile, the Bank of England cut rates even though inflation surprised to the upside. It’s a little like going on a diet by eating cake, but hey, central bankers are human too.

Trade tensions are still the world’s favorite soap opera. The U.S. slapped 50% tariffs on metals from over 60 countries, canceled trade talks with India, and threw in a shiny new EU trade framework for good measure. But with China, there was a 90-day truce. The script seems to change every week, but the theme is the same: uncertainty. As value investors, we prefer businesses that thrive despite uncertainty rather than because of political “deal making.”

On the earnings front, U.S. retailers are putting on a decent show. Home Depot beat expectations while still complaining about tariffs. Walmart, Target, and Lowe’s are reporting soon. Retail resilience is nice, but we shouldn’t mistake it for invincibility. Tariffs and higher input costs eventually find their way to margins, no matter how many self-checkout lanes you install.

Elsewhere, gold keeps shining like your cousin’s NFT collection back in 2021. It hit $3,374 an ounce, up over 30% year-on-year. Oil, on the other hand, has been wobbling between $63 and $67 as ceasefire rumors in Ukraine mess with supply expectations. The real takeaway: commodities will always be volatile, but the durable businesses that use them wisely are where the value sits.

Finally, AI regulation in Europe is moving forward, with Big Tech facing heavier compliance costs. That’s not just red tape—it’s a moat test. Companies that can handle the rules might actually strengthen their position, while weaker players could drown. Remember, as Munger liked to remind us, the world is full of foolish gamblers. The edge goes to those willing to be patient and rational.

So partner, that’s your week: central banks flirting with rate cuts, politicians making noise, markets throwing parties, and businesses just trying to keep the lights on. Same circus, new acts.

Happy investing!
Josh

The information is provided for educational purposes only and does not constitute financial advice or recommendation and should not be considered as such. Do your own research.