Friday's Market Minute: Markets Remain Focused On Jackson Hole As Global Risks Intensify

U.S. equities have rebounded as investors seek clarity from Jay Powell’s Speech at Jackson Hole this morning. The narrative this week has focused on whether or not the Fed is willing to “prop up” the economy in the event of a downturn, along with pressure from Donald Trump calling for a 100 basis point cut. As always, it is important to reframe the narrative in the context of the current economic environment, not just in the U.S. but in relation to the risks that exist globally. These risks have intensified today as China announced new tariffs on $75 billion worth of US goods, including a 25% tariff on U.S. automobiles effective Dec. 15th.

This recent announcement coupled with weak German economic data, a slowdown in U.S. manufacturing and China’s decision to devalue the yuan against a strong U.S. dollar continues to drive uncertainty in the market. However, recent economic data has shown that the U.S. consumer remains strong, and the Conference Board Leading Economic Index for the U.S. increased in July, continuing to point towards moderate second half growth. The U.S.’s continued economic strength has driven investors into the “safety” of U.S. government bonds, which has now driven yields lower.

Within this polarizing context and the recent developments out of China, Powell’s comments today will remain the key catalyst about where the economy is heading.

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