Markets are still rallying off the Powell "Put". Caught between recession and stagflation confusion, on hope of a recession as the Fed won't take rates over 3% and maintain their 8+ Trillion $ balance sheet. U.S. industrial production is booming and GDP growth is slowing = stagnation. Inflation is sucking dry personal expenditure.

Chart 1

Chart 2

The Powell "Put" is certainly holding (Chart 1), which was activated on the 27th July when markets rallied on the Federal Reserve's ambiguity and lack of guidance re: further interest rates.   The S&P 500 futures is now clear of the 4189 resistance (green line), which was seen in May 2021, refer to vertical purple line, when markets began their 2021 bull run.  The current rally does look overbought on the hope that the Fed will buy the recession call rather than inflation, which would mean two things offered to equity markets: 1.  Rates will stay under 3%.  2.  The Fed's close to 9 Trillion balance sheet won't unwind as fast.   Of course the market is getting ahead of itself, despite the Fed throwing out mixed messages.   

Chart 2 explains why inflation has not peaked out.   U.S. industrial production (area chart) spiked in July coming in at 0.6%, market consensus was for 0.3%, with manufacturing continue to rise at 0.7%.  Overall U.S. industrial production is still booming via tighter supply chains and higher wages, thus passing on rising costs (inflation adjusted) to the consumer.  The red line is the GDP growth rate for the U.S. now at -0.9% which shows contraction.  Indicative that inflation is sucking dry personal consumption, the main percentage component  of GDP growth rate.