Wall Street pulls back - positioning ahead of Jackson Hole?

We are currently observing quite a strong pullback on Wall Street. The S&P 500 is trading at its lowest level since August 23 and for a moment fell below its previous all-time high from mid-August. This may be related to Kaplan's recent CNBC interview - he is obviously one of the hawkiest members, but at the same time indicates what action the Fed may take in the near future.

In his opinion, the Fed will announce the tapering during the September meeting (which according to market expectations could mean the start of the tapering in November or December). Kaplan believes QE is a program to support demand. Demand is not a problem at the moment, so the Fed needs to start reducing this support. The tapering is expected to last 8 months and theoretically offers a chance for a rate hike at the end of 2022.

It's worth noting, however, that Kaplan is not a member of the FOMC (neither voting nor an alternative this year) so at the moment he may not have all the knowledge about what is going on in the FOMC.

Esther George, who is an alternate member, spoke earlier. She has a slightly more balanced view, but points out that it is time to admit that a discussion about tapering is taking place. This, however, means that the tapering itself would not be announced in September and later. The market indicates that the tapering could be announced in November and the process could start in December.

At the same time, such opinions before the Jackson Hole symposium may indicate that there is still a chance for a stronger statement from Powell. On the other hand,pullback may be the result of the recent suicide bombing at Kabul airport in Afghanistan. The harsh Taliban stance may mean that the Americans will decide to intervene, which may increase uncertainty in the markets (the latest information says about a dozen people killed and a badly wounded American soldier). The Taliban allowed until the end of August for all Americans to withdraw from the country.

At the moment, there is activity on the buyers side, therefore the continuation of the upward movement is not out of the question. Source: xStation5