It was a vicious sell-off on Friday after the Dow Jones Industrial Average plunged more than 1,000 points on a hawkish message from Federal Reserve Chair Jerome Powell.
The central bank leader delivered a short but impactful speech out of Jackson Hole, Wyoming. It spurred traders to weigh the implications of higher interest rates kept in place for longer than markets were anticipating.
"We do believe the Fed," said Zach Hill, head of portfolio management at Horizon Investments. "We believe what they say that rates are going to be higher for longer and we've seen some repricing of the cuts in 2023. We think there's more to go on that front and it's likely to continue to fuel equity volatility from here."
Meanwhile, a heated debate continued on whether the Fed can navigate a soft landing, as investors have tried to reconcile often contradictory economic reports such as rising inflation and a robust labor market.
"Recent US economic data has been encouraging, improving the likelihood of the Fed achieving a soft landing. But we think markets may have gotten ahead of themselves in pricing in this scenario," UBS's Global Wealth Management chief investment officer Mark Haefele wrote in a Friday morning note.
In contrast, Fundstrat's Tom Lee said Friday on CNBC's "Halftime Report" that he sees "a lot of evidence this is turning out to be a soft landing," adding that markets have priced in a recession.
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