Markets on Edge as Jackson Hole Looms

Powell’s Jackson Hole Speech Could Rattle Markets, Evercore Warns

Stocks kicked off the week just shy of record highs, supported by strong earnings and hopes the Federal Reserve will soon cut rates. Investors are now focused on Fed Chair Jerome Powell’s Friday speech at Jackson Hole, looking for dovish signals.

But Julian Emanuel, Evercore ISI’s chief equity and quantitative strategist, warns Powell may disappoint. In a note published Sunday, Emanuel said Powell faces a tough balancing act as inflation data has reignited concerns about price pressures, while labor market reports show weakening momentum.

At the same time, stock valuations are stretched. The S&P 500 trades at 25.5 times trailing earnings—among the highest since 2000—heading into what is often a seasonally weak period for equities. Emanuel points to Powell’s 2022 Jackson Hole speech, when his tough anti-inflation stance sent markets tumbling, as a reminder of the risks.

This year, disappointment could come if Powell only signals a quarter-point cut on September 17, rules out a half-point move, and emphasizes that further easing will depend on incoming data. That scenario, Emanuel argues, could trigger a 7% to 15% pullback into October, even within a longer-term AI-driven bull market.

His suggested plays: hedge downside with October puts on the Nasdaq-tracking Invesco QQQ Trust (QQQ), rotate into cheaper sectors like healthcare, and lighten up on pricey names including Palantir (PLTR), Cleveland-Cliffs (CLF), and Coinbase (COIN).