Jackson Hole Update - The Fed, Inflation & Markets

On Friday (Aug 27) Federal Reserve Chairman Jerome Powell gave a long anticipated, heavily previewed, speech to the Jackson Hole Economic Policy Symposium.  He was upbeat on his view of economic recovery, while downplaying inflation worries.  Powell spent a good deal of his speech explaining why he thinks the forces driving up inflation in recent months are transitory, arguing inflation expectations are well-contained, wage pressures are absent, and most of the run-up in prices we have seen is associated with reopening and will recede over time.

Market participants were relieved by Powell’s comments, interpreting them as an indication that the central bank isn't in a rush to begin curtailing its stimulus efforts even as it still anticipates beginning tapering the $120 billion worth of bond buying by year-end, and markets rallied sending the S&P 500 index above 4,500 for the first time.

 Jackson Hole

 

Why it matters: Over longer periods of time, stock prices and GDP have generally moved in the same direction as they are exposed to the same overarching trends. However, over shorter periods of time, they’ll sometimes move in different directions. The Fed is signaling that it expects to soon announce plans to taper quantitative easing (QE), an emergency monetary policy program designed to keep interest rates low and bond markets very liquid.

  • This tapering could introduce problems into the economy if the beneficiaries of the stimulus aren’t ready to see it go.
  • However, if market participants are prepared, market volatility related to the announcement could be limited.

 

What to watch: The next U.S. jobs report will be released today. If the number is strong, we could hear the Fed announce the initiation of tapering before the end of the year.

 

Symmetry Partners, LLC, provides this communication on this site as a matter of general information. Information contained herein, including data or statistics quoted, are from sources believed to be reliable but cannot be guaranteed or warranted. Nothing on this site represents a recommendation of any particular security, strategy, or investment product. The opinions of the author are subject to change without notice. Due to various factors, including changing market conditions and/or applicable laws, the content may not be reflective of current opinions or positions. All content on this site is for educational purposes and should not be considered investment advice or an offer of any security for sale. Please be advised that Symmetry Partners does not provide tax or legal advice and nothing either stated or implied here on this site should be inferred as providing such advice. Symmetry Partners does not approve or endorse any third party communications on this site and will not be liable for any such posts.

Diversification seeks to reduce volatility by spreading your investment dollars into various asset classes to add balance to your portfolio. Using this methodology, however, does not guarantee a profit or protection from loss in a declining market.

 

Back to Blog

Related Articles

Unfiltered Finance - Bitcoin: New Asset Class or Digital Tulip Bulb Mania

In late 2008 (perhaps in response to the financial crisis), someone using the alias, Satoshi...

Communicating a Better Client Experience

David Byrne from Talking Heads once sang, “Say something once, why say it again?” I will tell you...

Symmetry's 2nd Quarter Market Commentary

The world continues to recover (some areas faster than others) from the effects of COVID-19. We are...