How can the market react to Jerry Powell's speech at Jackson Hole

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "The only brilliant point of the & nbsp;economy, the strength of the US consumer could silence the message of the Fed this week, as central bankers prepare for an annual political conference in Jackson Hole, Wyoming. "data-reactid =" 15 "> The only positive point of the market The economy, which is the strength of the American consumer, could be right of the speeches of the Fed this week, while the central bankers are preparing for an annual political conference in Jackson Hole, Wyoming.

"There is a risk [Fed Chair Jerome] Powell and his colleagues end up disappointing the bond market next week – not signaling clearly enough that further rate cuts will take place in mid-September and beyond, "said Paul Ashworth, chief US economist at Capital Economics. "This could trigger a carnage in the bond and stock markets."

Last Thursday, July retail sales were released, a key component of consumer health. Retail sales rose 0.7% in one month, exceeding Wall Street's estimates by 0.3%. A strong consumer may urge the Fed to delay future rate cuts.

"Although the overall data input was weak, the latest US data series would not seem to warrant a further rate cut so quickly; not with the rebound in core inflation and the American consumer who seems to want to save the global economy alone, "wrote Ashworth.

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Powell is scheduled to speak at Jackson Hole Friday, nearly a month after his tumultuous press conference on July 31. Even though Powell lowered interest rates, what the market operators were waiting for, he sent conflicting messages, leaving investors wondering if the discount was and is "or the beginning of 39, a more substantial relaxation cycle.

Since then, trade tensions between the United States and China have worsened and the yield curve has reversed, which historically preceded a recession. Investors are counting on the Fed to lower interest rates to help "reverse" the yield curve.

At the same time, Jackson Hole's comment this week is not the Fed's only checkpoint this week: the July Fed meeting report is released on Wednesday.

"[The minutes] could also be a major market driver if they demonstrate that the managers have resisted multiple rate cuts, "added Ashworth.

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While Ashworth highlights the market risk of a more hawkish tilt in the Fed's messages this week, he acknowledges the uncertainty surrounding the forecast of Fed messages because "the Fed's communication has become terribly bad".

"The collective inexperience within the FOMC has begun to manifest itself – the Fed decided to raise its key rate last December due to a complete collapse of the stock market, and then to the stock market. reverse with a stock market close to a record, "he wrote. "It is also possible that Powell will simply drop any discussion of a mid-cycle adjustment next week and comply with the market's wishes."

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