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Friday, August 23, 2024

Jackson Hole Symposium Explained: Why Should You Care?

By Century Financial in 'Blog'

Jackson Hole Symposium Explained: Why Should...
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What Is the Jackson Hole Symposium?

Since 1978, the Federal Reserve Bank of Kansas City has sponsored the annual Jackson Hole Economic Symposium, held in Jackson Hole, Wyoming, since 1981. One of the world's oldest conferences on central banking is the Jackson Hole Economic Symposium.

The gathering's purpose is to promote candid conversation. Each year's theme is considered when choosing attendees, and extra care is taken to represent a diversity of regions.

Who Attends the Jackson Hole Symposium?

The attendees include leading figures from the global financial markets, academic elites, and central bankers and finance ministers.

The Federal Reserve Bank of Kansas City charges attendees a fee to defray the symposium's costs. About 120 individuals from various businesses and backgrounds usually attend every year. Only a few participants can attend, and certain media members are invited. This gives the symposium transparency and helps to maintain its focus on the course.

Why does the Jackson Hole Symposium matter?

Central bankers have made significant announcements on monetary policy and the state of the world economy during this conference in recent years. The fact that the event is taking place in late August when economic data is generally scarce and significant earnings have been announced, contributes to its high level of attention.

What Do They Talk About?

The symposium requests papers from specialists on the subject for the year-related subtopics each year. As of August 19, 2024, more than 150 authors had given papers covering international trade, labour markets, and inflation. All papers are available online.

Previous meetings have seen the then-heads of the Fed make essential speeches.

In 2010 Ben Bernanke laid out options for further policy easing that was viewed as the signal for more quantitative easing. In 2012, he spoke of his ‘grave concern’ for markets, which was followed by a third round of quantitative easing.

Janet Yellen, now US Treasury Secretary, used her 2016 address as Fed chair to prepare the market for more rate hikes, which began in December 2016 and continued until 2018.

Past Jackson Hole Highlights

Federal Reserve Chair Jerome Powell has historically attended the influential economic symposium each August.

Our research team has highlighted the Fed’s stance at previous Jackson Hole meetings and illustrated the historical performance of the S&P 500 in earlier speeches Powell made at the Jackson Hole convention between 2019 and 2023.

The table below illustrates the historical performance of the S&P 500 during previous speeches made by Powell at the Jackson Hole convention between 2019 to 2023.
Year Date Fed' stance S&P 500 Index Nasdaq 100 Index
On the day On the day
2024 23-Aug-2024 Could potentially signal a rate cut at the September FOMC ? ?
2023 25-Aug-2023 Powell acknowledged the progress in bringing inflation down while stating that it still remained too high above the target. Fed maintained rates between 5.25% to 5.50% since July 2023, reiterating the higher-for-longer narrative. 0.67% 0.85%
2022 26-Aug-2022 Inflation had risen to a 40-year high and was running at its fastest pace since the early 1980s. Unemployment had fallen to the lowest levels since the 1960s. The Fed had embarked on an aggressive tightening spree and signaled more rate hikes even at the cost of weakening the labor market. -3.37% -4.10%
2021 27-Aug-2021 Inflation had risen to more than double the Fed’s 2% target. Powell was in no hurry to raise interest rates as the central bank believed inflation was transitory and would resolve on its own. The Fed also did not see any need to taper its bond-buying program. 0.88% 1.01%
2020 27-Aug-2020 The sudden and severe economic downturn caused by the COVID-19 pandemic in early 2020 resulted in record-breaking job loss within just two months. The Fed bought trillions of dollars of bonds and pinned rates to zero to stimulate the economy. Powell stated the Fed wouldn’t raise rates unless there was a considerable spike in inflation. Critics contend that this policy change contributed to the Fed’s delayed response to the inflation surge that began in 2021. 0.17% -0.38%
2019 23-Aug-2019 In 2018, the Federal Reserve increased interest rates to combat rising inflation triggered by US-China trade wars. Subsequently, in 2019, Federal Reserve Chair Jerome Powell initiated interest rate cuts and signaled further reductions. However, President Trump criticized Powell for the perceived slow pace of these cuts. -2.59% -3.15%
Average -0.85% -1.15%

Click here to view it completely.

What is happening this year?

In 2024, the topic will be ‘Reassessing the Effectiveness and Transmission of Monetary Policy’.

The conference may see central bankers from the US, UK, and the eurozone discuss the outlook for easing monetary policy more, i.e., cutting interest rates. The Fed used its most recent meeting to keep policy unchanged, but Jerome Powell opened the door to a rate cut in September due to the slowing of price pressures in the US and signs of labour market weakness.

How Jackson Hole Could Affect Your Portfolio?

The speech by Fed Chair Jerome Powell on Friday will be critical. It will likely lay the groundwork for an interest rate cut at the Fed's September policy meeting. However, since financial markets have already fully priced in such a potential rate cut, attention will instead turn to how much the Fed might cut rates in September and later meetings.

Understanding the potential impact of announcements on the various asset classes present in your portfolio can help you make better decisions.

Cross-Asset Reactions to Powell's Jackson Hole Addresses
Year Date U.S Dollar Index Goal U.S. Treasury Bond Ultra Euro Buxl
On the day On the day On the day On the day
2024 23-Aug-2024 ? ? ? ?
2023 25-Aug-2023 0.09% -0.10% 0.00% -0.56%
2022 26-Aug-2022 0.31% -1.17% 0.46% -0.62%
2021 27-Aug-2021 -0.40% 1.40% 0.50% -0.19%
2020 27-Aug-2020 -0.01% -1.28% -1.68% -0.69%
2019 23-Aug-2019 -0.54% 1.93% 1.48% 0.47%
Average -0.11% 0.16% 0.15% -0.32%

Click here to view the historical movement of various asset classes on the day of the event.

Should You Make Any Changes Based on Jackson Hole?

With the Jackson Hole Symposium just around the corner, the financial world is focused on Fed Chairman Jerome Powell’s upcoming keynote address. The stakes are high, given the mixed signals from recent economic data and the potential for a rate cut in September. Powell’s speech could offer crucial insights, but it’s also possible that he will remain cautious and avoid making definitive statements ahead of the September FOMC meeting.

Given this uncertainty, it might be wise to hold off on making significant changes to your investment strategy until more information becomes available.

For a deeper dive into how Powell's past Jackson Hole speeches have influenced the markets and what to watch for this year, check out our detailed article, "Jackson Hole Symposium: Powell’s Keynote Address Takes Center Stage Before September FOMC." This will give you context and analysis to navigate these uncertain times.

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