The Jackson Hole Economic Symposium, which runs from August 27 – 29 and is capped off with a speech by new Fed Chair Kevin Warsh on Friday morning, is drawing a disproportionate amount of attention this year.
The Kansas City Fed kicked off its annual symposium with a session on agricultural trade in 1978 in Kansas City, MO; it wouldn’t move to Jackson Hole until 1982, and it wasn’t particularly relevant (at least as far as investors are concerned) until the late 2000s with former Chair Ben Bernanke at the helm and the implementation of Quantitative Easing in response to the Great Financial Crisis.
[text_ad]
In other words, dry conversations and academic theory on fiscal policy and macroeconomics weren’t major needle-movers for investors until the Fed turned on the money printers.
What’s Different This Year
This year’s theme is “Financial Innovation: Implications for Payments and Policy,” and the conversation will presumably center on financial innovation in the vein of FinTech, tokenization, central bank digital currencies, crypto, etc.
The Federal Reserve Bank of Kansas City typically issues a press release in the days leading up to the Symposium, which should be available here sometime next week.
There will, undoubtedly, be valuable insights into the evolving nature of FinTech in a world in which agentic AI may, at some point, need payment rails to enable independent financial decisions, but that’s not why investors are tuning in.
Rather, investors are going to be watching because the Fed’s September meeting is right around the corner. As I write this, the CME FedWatch tool shows that markets are pricing in a 36.6% chance of a rate hike at the September meeting, with a 68.2% chance of one rate hike or more through the end of this year.
Plus, after a lackluster showing so far in his term, Jackson Hole gives Chair Warsh an opportunity to clarify his stance on how he expects to corral inflation and what guidance (if any) the markets can expect going forward.
Why You Should Care
If Warsh leans dovish (and a little more forthcoming) and signals that a rate hike isn’t in the cards and that there will be more clarity coming from the Fed, stocks could rally, bond yields could fall, and gold might catch a bid. Small-cap stocks would be obvious beneficiaries given their tendency to outperform during periods of low interest rates.
If he sounds cautious or noncommittal, then the “family fights” he’s so fond of discussing rise above the level of background noise and become the actual signal from the FOMC, undercutting the value of the regular FOMC press conferences.
It’s important to note that part of the reason this symposium is under intense scrutiny is not just Warsh’s recalcitrance to provide meaningful guidance to the markets. Additionally, July’s meeting saw three dissenting members for the first time since 2016, making for a relatively large roster of “vocal hawks,” in the words of Ian Lyngen, head of U.S. rates at BMO Capital Markets.
In other words, there is already highly visible internal pressure on Warsh to hike while the market prices in expectations that rates will hold steady, setting itself up for acute disappointment in the event of a surprise hike come September.
Jackson Hole is a high-profile opportunity for Warsh to put some of this uncertainty to bed by positioning himself as an active leader of the FOMC, rather than just a passive mouthpiece (although he’s shown no inclination towards the latter thus far).
Now, Jackson Hole itself doesn’t typically prompt a ton of volatility in the market.
Per a note from DataTrek Research co-Founder Nicholas Colas, written prior to 2025’s summit, the market tends to rally in the two weeks around the meeting.
From 2010 to 2024, the S&P 500 rallied, on average, 0.9% in the two weeks around the summit due to, per Colas in a research note, “incremental clarity from the chair’s speech, which in turn boosts equity valuations.” Last year, it nudged higher by only 0.16%.
What to Do as an Investor
Should Warsh come out and signal (even implicitly) that the Fed will take a more guidance-focused stance going forward, that could help resolve some of the uncertainty in the markets and prompt a rally, at least in the short term.
But if, on the other hand, Warsh does little more than promise that the Fed is focused on “price stability,” without outlining some semblance of a plan to achieve that, then it’s not hard to imagine more downside volatility of the variety we encountered on July 29.
Given the weak seasonality (September is historically the worst month for the market) and elevated valuations, a scenario in which a bearish response to Jackson Hole snowballs into a bout of seasonal selling certainly seems to be in play.
The upcoming commentary shouldn’t be the deciding factor, but if you’ve been on the fence of late, it can certainly be a deciding factor. If you’ve been selling some winners and building up cash, and Warsh shows that he’s not only growing into the role but also that the Fed will be a guiding hand for the markets, it’s a green light (keep in mind the weak seasonality, though). But if his speech is “full of sound and fury, signifying nothing,” as it has been in his two FOMC press conferences so far, be ready to play some defense.
[author_ad]
