Republic Risk: This Boring Event Sets the Tone for the Next Two Months

Everyone in financial media gets a vacation to Wyoming this week. Why can't they actually press on the Fed's policies and explain to Americans why this cabal is so powerful.

Equity Storm Watch Is GREEN on the S&P 500 and GREEN on the Russell 2000

Dear Fellow Expat:

And the hysteria of the Federal Reserve returns.

We have another busy week ahead of us, headlined by the Federal Reserve's Jackson Hole Symposium.

The Kansas City Fed will host this event - but it will not be as exciting as a Kansas City football game set for three weeks time against the Baltimore Ravens. 

A “who's who” of central bankers and financial ministers will gather at the stunning Jackson Lake Lodge from Thursday through Saturday. CNBC anchors will take long walks through the fields with these central bankers - yet they will never take the time to explain that these are the real masters of the universe. They’ll spend too much time fishing for trout instead of real quotes.

They don’t have the decency to explain that Jerome Powell and Janet Yellen have had far more power over Americans than the last four presidents. 

They have an absolute monopoly on the money supply and easily distort foreign exchange rates - which are the real cost of money.

But they mask all this news around very boring themes.

This year's theme is: Reassessing the Effectiveness and Transmission of Monetary Policy.

Sounds riveting.

Historically, Jackson Hole has been a platform for significant policy announcements. 

In 2010, Bernanke advocated for additional quantitative easing to aid the economy's recovery. 

In his 2022 speech, Jerome Powell sent markets tumbling when he committed to significant rate hikes to bring inflation back to 2%, leading to a 16% market drop over the following two months. 

Last year, Powell reiterated that rates would stay higher for longer.

Powell is scheduled to speak on Friday morning, and there is growing speculation that he may signal a shift from his 2022 stance. Whatever Powell says will likely be interpreted as bullish, especially as we approach potential rate cuts.

I have repeatedly said that inflation is still too high to take action. The Treasury Department needs to unwind all of its policy efforts first. According to Nouriel Roubini, Yellen has contributed through fiscal operations, which is about a full point cut on the Fed Rate.

Given the market's resiliency, Powell is unlikely to advocate for raising rates or maintaining them higher for longer. 

All signs point to an upcoming cut, which the market is poised to celebrate.

So far this morning, S&P and Nasdaq futures are flat after coming off their best week of the year, driven by billions in untethered capital returning to American shores. 

We'll see if the momentum can sustain through the first half of the week, leading up to the Fed minutes on Wednesday, followed by jobless claims and housing data on Thursday and Friday.

The markets remain resilient for now, ignoring the massive implosion that rocked Japan just two weeks ago. It’s a good reminder to watch for shifts in policy changes. The central banks are doing everything they can to avoid anything to unsettle the U.S. bond markets. 

Now, let’s look at a few other things on the docket…