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Investors are all eyes on the Federal Reserve's Jackson Hole Economic Symposium this week, searching for hints about potential rate cuts after the US posted softer job numbers.
What does this mean?
Jackson Hole has built a reputation as the market's unofficial mood-setter for monetary policy, with remarks from Fed Chairs regularly moving stocks. DataTrek Research points out that the S&P 500 usually rises around the event -- unless tough Fed talk takes the spotlight, as in 2022, when inflation warnings sent stocks down 7.4%. That year wrapped up with the index losing over 19% as interest rates climbed. Skipped appearances by Fed bosses, like in 2013 and 2015, have seen stocks slide, too. Heading into this year, the S&P 500 has edged down, but analysts note history suggests potential for a bounce if Jerome Powell hints at rate cuts. With recent labor data looking weaker, 84% of traders polled by LSEG now expect a rate cut at September's meeting.
The Fed's signals at Jackson Hole often set the pace for stock markets, sparking volatility or relief depending on the tone. With the S&P 500 dipping ahead of the event, many are hoping for a rebound if Powell shows willingness to ease rates. Clear policy direction can boost valuations -- especially after a streak of sluggish economic data -- giving investors a better sense of where to place their bets.
The bigger picture: Policy pivots ripple globally.
Moves by the Fed don't stop at US borders: a switch toward lower rates would influence global borrowing costs, capital flows, and the strength of the US dollar. If a rate cut looks likely, expect ripple effects across world markets, from falling global yields to shifting currency dynamics, and changes in everything from mortgage rates to company financing costs.