Asia’s faith in the ‘Powell put’ may be misplaced

TOKYO – As 2025 wraps up, Asian markets hold onto a secret weapon after a turbulent year: Jerome Powell. On Thursday, the region's stock exchanges rose once more, driven by expectations that the US Federal Reserve chair will keep interest rates steady or even lower them as 2026 begins.

Markets across Asia have become reliant on what traders call the “Powell put”—the belief that Powell’s Fed will step in to prevent drastic market falls by carefully managing monetary policy. This confidence has buoyed equities despite ongoing economic uncertainties, including inflation pressures and geopolitical tensions.

However, some analysts warn this faith might be overly optimistic. The “Powell put” assumes the Fed will always act to support markets, but Powell’s responses must balance inflation control and market stability, a delicate act that may not always favor stock prices.

The regional impact of US monetary policy

Asian equities have repeatedly rallied on Powell’s comments suggesting a dovish stance. Investors interpret pauses or hints at rate cuts as green lights to take on risk, fueling rallies. Yet, with inflation still a concern and global growth uncertain, the Fed’s path is far from guaranteed.

If Powell prioritizes curbing inflation over market support, Asia could face sharper corrections. Moreover, the region’s economic fundamentals will increasingly influence market direction, reducing dependence on US monetary policy alone.

What this means for investors

Investors are advised to diversify strategies and not rely solely on expectations of Fed interventions. Asian markets must prepare for scenarios where the “Powell put” no longer cushions downturns. A more balanced approach considering local economic trends and global shifts will be crucial.

"Reliance on the Federal Reserve to rescue markets every time could mask underlying vulnerabilities," says a regional market strategist.
"Investors should watch both US signals and Asia’s domestic conditions closely."

The belief in the Federal Reserve’s cushioning effect may soon confront real limits, urging Asian markets and investors to proceed with caution and broader awareness.

Asia Times — 2025-11-27