Will FRB Chair Powell Jackson Hole speech increase volatility? As noted the other day, there is precedence of a major change in monetary policy announced at this annual gathering. At this juncture, the market is seeking assurances that a rate cut is likely at the September meeting.
The major topic of this year’s flagship event is structural changes within the labor market. What comments will Powell make concerning the anemic labor participation rate (LPR), a rate that is being suppressed by the lack of participation of the most important cohort of workers aged 25-55.
The LPR over the cadre over 65 is considerably higher than the historical average, perhaps indicative of the inability of retirees to make ends meet because of inflationary pressures and the lack of retirement savings.
Yesterday Treasury yields rose across the spectrum as the data indicated the fastest growth in manufacturing since 2022. The statistics exceeded expectations by a considerable margin.
The odds of a 25-bps reduction in the overnight rate at the September meeting slipped to around 65% versus about 80% before the data was released. One week ago, the outcome of the September meeting was at least of a 0.25% cut was all but assured.
Led by the technologies, equities declined for the fifth consecutive day, the longest slide since January. Is this just profit taking from the blistering rally in the techs since April or is it something more at foot?
Last night the foreign markets were up. London was up0.10%, Paris up 0.22% and Frankfurt up 0.10%. China was up 1.45%, Japan up 0.05% and Hang Seng up 0.93%.
Futures are flat heading into Powell’s anticipated speech which many are hoping that a rate cut is possible in September. The question at hand is whether the markets have fully discounted a possible disappointment as the S & P 500 has fallen five consecutive days, the longest stretch since January. The 10-year is off 1/32 to yield 4.33%.
