There are few signs of the economic struggles predicted at Jackson Hole last year.
Attention will be focused on Wyoming this week, where the 46th Jackson Hole Economic Symposium is taking place.
Despite its bland moniker, the annual event is a big deal that brings together central bankers (including Fed Chair Powell), finance ministers, and other financial market participants from around the world. Investors look to Fed officials’ speeches and comments at Jackson Hole for signs of what the future may hold.
Sometimes, investors hear what they expect; other times, not so much. Last August, Chair Powell surprised many investors (who were expecting a dovish tone from the Fed) with a warning of economic pain ahead. Powell’s comments about the need to aggressively fight inflation and the likely impact of that effort—“using our tools forcefully,” “sustained period of below-trend growth,” “softer labor market,” and “pain to households and businesses”—helped drive stocks down to their October 2022 lows.
The thing is, very little of that predicted pain has emerged. Since Jackson Hole 2022:
- There are just over three million more people employed.
- The unemployment rate is lower, and labor force participation has increased.
- Economic growth has remained strong, with real GDP expanding by 2.6% during the last
- Inflation* has fallen by 5.1 percentage points, from 8.3% to 3.2% (as measured by the
Consumer Price index, see the chart).
Additionally, many major equity market indices are up over the past 12 months. The most significant pain point has probably been fixed income: Core bonds are down 3.5% in total return terms due to sharply higher bond yields (with the 2-year Treasury up 155 basis points and the 10-year Treasury yield higher by 120 basis points).
This year’s conference theme is “Structural Shifts in the Global Economy.” As always, investors will be parsing comments from Powell and others about the likely road ahead—mainly whether interest rates may remain at relatively high levels for an extended period of time, even if inflation continues to decline from current levels. We expect volatility and position adjustments around events like Jackson Hole, but we broadly view the recent action across equities and fixed income as more of a healthy correction than a new trend.
* Headline CPI data
This commentary is written by Horizon Investments’ asset management team.
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