Key Takeaways:

• Despite a hawkish tone, Chairman Powell is in full-on risk management mode.

• Federal Reserve (Fed) officials are uncertain about the time it takes for tighter policy to flow through the economy.

• Fed funds are above inflation and unequivocally restrictive.

• Being data-dependent means the markets are right—the Fed will likely cut rates in 2024.

Introduction

Chairman Powell closed out his speech at last week’s Jackson Hole Symposium with a whimsical, yet fitting analogy for setting monetary policy. He said the Fed is “navigating by the stars under cloudy ski

The Federal Reserve (Fed) often uses the Jackson Hole Symposium to announce tweaks in policy. Other central bank leaders are also worth watching as investors try to perceive where rates will be in the coming months. In this piece, we discuss some of the opportunities and risks we see in the markets and the economy following the central banker confab. We close the piece with investment implications.

Key Takeaways

• Global monetary policy will likely diverge as inflation dynamics vary.

• Beige Book of “soft data” could become increasingly important for market-watchers.

• Fed funds rate will like

Volatility has returned right on cue as U.S. equity markets continue to pull back from overbought levels. The recent jump in interest rates has proven to be too much too fast for stocks to absorb, especially for the heavyweight and longer-duration technology sector. Deteriorating economic conditions in China and weak seasonal trends have been additional factors behind the selling pressure. However, don’t panic, pullbacks are completely normal within a bull market. With volatility comes opportunity, and as valuations reset, overbought conditions recede, and support is found, we believe a buying opportunity back into this bull market will

Key Takeaways:

• Yields have moved a little too much too fast for equity markets, pushing the correlation between stocks and 10-year Treasury yields into negative territory for the first time since March.

• From a technical perspective, 10-year Treasury yields remain uncomfortably high as they approach resistance from the October highs. Considering stocks bottomed nearly at the same time longer duration yields topped out last fall, a breakout to new highs on the 10-year would be a warning sign for a potentially deeper pullback in stocks.

• Energy could outperform if yields continue higher. The sector is the only one p