Bank of America Global Research discusses the market conditions in light of last week's Fed Powell Jackson Hole speech.
"Powel triggered a risk-on market move with his Jackson Hole speech last week, which may not be sustained this fall. Markets liked Powel’s new forward guidance on rates, delinking hikes from the end of QE," BofA notes.
"However, we believe the market’s positive reaction to Powell is based on two key assumptions that could prove to be inaccurate. First, that the impact of the Delta Covid variant on the real economy would be small. And second, that inflation would stabilize to a level that the Fed can accept once temporary effects fade. Following developments on both these fronts should be the main focus for investors in the months ahead, in our view. The two may also be related, pointing to stagflation risks," BofA adds.