Will Powell’s Speech Save the Market Rebound?

Strategist Warns of Fragile Market Ahead of Powell’s Jackson Hole Speech

As Federal Reserve Chair Jerome Powell prepares for his highly anticipated speech at the Jackson Hole Economic Symposium on Friday, market watchers are expecting him to signal a potential rate cut in September. However, if Powell’s message deviates from these expectations, it could put the stock market’s recent rebound at risk.

Powell is set to discuss the economic outlook at 10 a.m. Eastern time during the annual gathering, which traditionally draws top U.S. and global central bankers. Although Jackson Hole is not usually a platform for immediate policy signals, this year’s speech will be closely analyzed due to recent market volatility and shifting expectations for the Fed’s rate path.

The stock market has seen mixed reactions to past Jackson Hole speeches. Over the last 20 years, the S&P 500 has averaged a 0.4% gain during the conference, with modest positive returns in the following months.

However, last year’s event saw the S&P 500 drop 3.4% after Powell indicated that the Fed’s rate-hiking cycle would continue longer than expected.

This year, analysts widely believe Powell will emphasize that inflation is easing, which could justify a rate cut in September. However, Steve Sosnick, chief strategist at Interactive Brokers, cautions that investors may be overly optimistic. He suggests Powell might indicate a more measured approach, signaling that while rate cuts are possible, they will be gradual unless the economic data worsens.

“I’m preaching a bit of caution ahead of Jackson Hole,” Sosnick said. “The more the market rallies in advance, the more fragile it might become.”

U.S. stocks closed the week higher, with the Dow Jones, S&P 500, and Nasdaq all posting their best weekly gains since early November. In addition to Powell’s speech, investors will also focus on the Fed’s July meeting minutes and key labor market data next week.