Economy
Temperatures are beginning to drop, football is back on TV, and the kids are back in school. That can only mean one thing - it's rate cut season. Every year, the Fed holds its annual symposium in Jackson Hole, Wyoming in late August. At last year's symposium, it marked a turning point for the Fed when chairman Jerome Powell announced, "The time has come for policy to adjust." This greenlit the Federal Open Market Committee to issue several rate cuts at the subsequent September, November, and December FOMC meetings. Since December 2024, we have not seen any further rate cuts as the Fed has been very vocal about its concerns of inflation reaccelerating due to the Trump administrations tariff policies.
This week, the Fed headed out west to Jackson Hole once again, and yesterday we heard similar remarks from the chairman. Speaking to the Fed's balancing act of attempting to manage stable prices and full employment, Powell stated, "with policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance." If they've been nothing else, the Fed has been transparent about signaling to the market what their next moves may be. We've got 25 days to go until the FOMC's next meeting where we'll see whether or not rates have been "adjusted". Between now and then, we'll get some more data on the strength (or lack thereof) of the labor market and the rate of inflation. While the Fed hasn't made a rate cut official yet, the market is pricing in a cut of 0.25% at the September meeting (according to the CME FedWatch tool).
Markets
The market was like a coiled spring this week, falling for the first four days, then shooting higher on Friday to close out the week in positive territory. For the week, the S&P 500 rose by 0.27%, just barely shy of making a new all-time high as the market reacted to Powell's Friday morning speech. For the Dow truthers, the Dow Jones Industrial Average closed at a new all-time high.
We had a couple of major retailers in Target and Walmart report their earnings this week (and it was a forgettable event for both corporations) but the market was primarily focused on the Fed. However, in the coming week, it's going to be hard to not pay attention to earnings reports as arguably the most important company in the world will report. All eyes will be on Nvidia, who reports Wednesday afternoon. Despite falling 30% to start the year, the stock is up 35% since January 1, and expectations for the microchip designer are high. We're several quarters removed from when people were throwing watch parties for Nvidia's earnings calls, but it's still a very significant event for the market.
What We're Reading
- Stocks surge after Powell signals rate cuts ahead - Axios
- Retirement is only halfway up the mountain - Tony Isola
Have a great weekend.
Dogwood Wealth Management