Anticipation for Powell’s Jackson Hole Speech

August 20, 2024

WisdomTree Senior Economist

I have received a lot of blowback from my recommendation that the Federal Reserve (Fed) drop the Fed Runds Rate by 150 basis points (bps) over the next several weeks. Certainly, the data has come in stronger than I (and many others) have anticipated. Particularly surprising was the drop in jobless claims, now nearer to the midpoint of my 200k to 240k range after breaching the upper limit.

Nevertheless, I maintain my stance that the Fed has reached its target in the labor market and, if shelter is properly measured, is also at target on inflation. If they truly believe that the neutral Fed Funds Rate is 2.80%, they should be much closer to that number now. In fact, the Taylor Rule, and a host of other forward-looking policy rules, dictate a Fed Funds Rate below 4% at the current time.

The fact that GDP growth is tracking at about 2% this quarter does not change the story. 2% is virtually the Fed’s estimate of the neutral GDP growth rate. There is no overheating here. Commodity prices are also down considerably from their highs. Hopefully the Fed can better explain its methodology.

This week’s big event is Powell’s speech at the Jackson Hole Economic Symposium at 10 a.m. on Friday. I expect him to clear the path for a rate cut in September, but not divulge the size. He will say we are becoming more confident that inflation is moving towards our target, and that we can afford to loosen the degree of monetary restrictiveness. There is still much data to come; August inflation and payrolls as well as four more jobless claims.

The bounce-back in the market is a reflection of the relief that the economy is not falling into a recession. Technicians will want to see if it can breach new highs. If it falters, equities are likely to be range bound, at best, for the rest of the year.

Important Risks Related to this Article

Past performance is not indicative of future results. You cannot invest in an index.

Professor Jeremy Siegel is a Senior Investment Strategy Advisor to WisdomTree Investments, Inc. and WisdomTree Asset Management, Inc. This material contains the current research and opinions of Professor Siegel, which are subject to change, and should not be considered or interpreted as a recommendation to participate in any particular trading strategy, or deemed to be an offer or sale of any investment product and it should not be relied on as such. The user of this information assumes the entire risk of any use made of the information provided herein. Unless expressly stated otherwise the opinions, interpretations or findings expressed herein do not necessarily represent the views of WisdomTree or any of its affiliates.

Perspectives in Onchain Finance

View all

WisdomTree Senior Economist

Jeremy J. Siegel, WisdomTree’s Senior Economist, is the Emeritus Professor of Finance at The Wharton School of the University of Pennsylvania. Professor Siegel has written and lectured extensively about the economy and financial markets and is a regular contributor to the financial news media. In 1994, he received the highest teaching rating in a ranking of business school professors conducted by BusinessWeek magazine. His book Stocks for the Long Run was named by The Washington Post as one of the 10 best investment books of all time. His second book, The Future for Investors, was a bestseller, and his research on dividend investment strategies in that book coincided with WisdomTree’s development of its original family of dividend-weighted stock ETFs, the first of which launched in 2006. Currently, Professor Siegel and WisdomTree collaborate on a suite of Model Portfolios that incorporate Professor Siegel’s outlook for stock and bond returns and the latest research from the sixth edition of Stocks for the Long Run.

READ ALL INSIGHTS