Powell Can Drag Stocks Down With This Update From Jackson Hole
There is one way Federal Reserve Chair Jerome Powell can send bond yields higher and stocks lower in his address.
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Expect Federal Reserve Chair Jerome Powell to push back on the “labor market is weak” narrative (which I continue to believe is true and why the Fed should be cutting in September) in his comments from Jackson Hole.
Economists seem to be honing in on a “replacement rate” level of hiring, in the 50,000 to 80,000 range. That seems low and, if discussed, will likely agitate the president as numbers less than 100,000 as the level of hiring required to keep the unemployment rate stable just don’t seem that exciting.
Even if the Fed plans to cut interest rates, it would like that to be a bit of a surprise (keeping the probability of a rate cut at the next meeting closer to 50% than 100% likely suits it best).
If Powell is able to convince markets that jobs are comfortable but inflation isn’t, look for bond yields to go higher, dragging stocks down with them. Some of this already has been priced in, so the move should be “normal” in size, rather than some outlier.
Recent news on the AI/data center side seems to have slowed the excitement for investing in those sectors a little this week.
