Jerome Powell Set To Deliver Jackson Hole Speech That Tanked Stocks Last Year—What Wall Street Predicts This Time Around
Jerome Powell, the head of the Federal Reserve, will soon give an update during the central bank's yearly event that focuses on future objectives. This has left the market in a state of anxiety and anticipation, as we are currently experiencing the most significant tightening cycle in the past forty years. Investors were unnerved by Powell's speech during the same event last year.
Chairman Jerome Powell from the Federal Reserve appears before the Senate during the upcoming season to provide testimony.
Powell is scheduled to appear on Friday morning at 10:05 a.m. ET for the duration of the three-day event in Jackson Hole, Wyoming.
During the identical assembly in August of last year, Powell gained notoriety for cautioning that the United States might have to embark on an extensive duration of highly stringent monetary measures, resulting in some distress. This statement caused upheaval in the market, as it has grown accustomed to a congenial Federal Reserve and decreased interest rates.
The S&P 500 experienced a decrease of over 3% on the day Powell delivered his speech in 2022 and suffered a significant decline of 13% one month after the Jackson Hole event. This resulted in stocks reaching their lowest point since 2020.
Contrary to the drastic event that occurred last year, the occurrence in Jackson Hole conventionally does not have a significant impact on financial markets. Based on information provided by Dow Jones, the S&P has only experienced a marginal increase of 0.3% on average during the month following the symposium, spanning from 1978 to 2022.
According to the chief economist at Comerica, Bill Adams, Powell will most likely remain quiet at the Jackson Hole event. On the other hand, strategists from Goldman Sachs, Lexi Kanter and Michael Cahill, anticipate no significant indications regarding monetary policy during the upcoming weekend.
Tom Lee, who leads the research team at a small and specialized equity research company called Fundstrat, made a forecast earlier this week. He said that there is a high probability (more than 80%) that stocks will increase after Powell delivers his speech on Friday. Lee also mentioned that in the past, the S&P index has shown positive performance in the week following the Jackson Hole meeting in six out of seven instances when it had experienced two consecutive weeks of losses beforehand. This is currently the case for the S&P index, as it has had two weeks of decline leading up to the meeting.
During his five years as the top banking official in the United States, Powell's main focus has been on addressing the country's highest inflation since the early 1980s, which soared to a peak of 9.1%. Starting in March of last year, the Federal Reserve increased the federal funds rate from almost zero to a range of 5.25% to 5.5%. As a result, the stock market, which typically benefits from lower interest rates as they lead to higher corporate profits, has experienced a decline from its previous record levels during the early stages of the pandemic. Despite a 15% gain in the stock market so far this year, the S&P has dropped by 8% from its peak in late 2021.
Things To Look Out For
The forthcoming publications will provide more information about the consequences of the Federal Reserve's efforts to reduce the monetary supply. The monthly release of the personal consumption expenditures price index, which is the inflation measure favored by Powell, will be disclosed on the following Thursday, and at the same time, the Labor Department will publish their monthly employment report.
ADDITIONAL NEWS FROM FORBESFurther Increases in Interest Rates Could Still be Imminent, Federal Reserve CautionsBy Derek Saul
Additional Content from Forbes magazine: The Reason Why Investors Shouldn't Be Concerned about the Federal Reserve's Jackson Hole Symposium, According to Sergei Klebnikov.
Barrons: Historical Performance of the Stock Market Post-Jackson Hole
