Markets steady ahead of Jackson Hole

Back on the fence

A relatively muted session on Wednesday as investors sit on the fence ahead of the Jackson Hole Symposium later in the week.

It’s all gone very quiet in the markets, which is hardly surprising under the circumstances. The combination of light news flow, few economic releases and caution ahead of the Jackson Hole event has taken all of the excitement out of the markets. Instead, it’s been replaced by nervous anticipation as we wait to see what the Fed will do next.

Frankly, I wouldn’t be surprised if this turns out to be one big anticlimax, with Powell saying very little of note and instead insisting that the data will dictate any decisions in the upcoming meetings. In other words, the Chairman may simply kick the can down the road and buy the central bank a few more weeks.

Rather sensible in the grand scheme of things. But it may not do much for these markets unless it’s accompanied by something more substantial. If not, then the next few weeks may see plenty more of this kind of inactivity, as anticipation builds ahead of the September meeting.

Durable goods orders provide cause for optimism

US durable goods orders remained strong in July despite a slight dip in the headline number driven by a drop in Boeing aircraft purchases.

These are very volatile large orders which is why the core number is often a better reflection of spending habits. Core orders rose 0.7% – ahead of expectations – while the June reading was also revised higher by 0.2%.

While recent PMIs suggest growth may have slowed a little, which could be reflected in future orders, the US continues to look in a healthy position and that should be reflected in the data in the longer term.

Large cash piles and a willingness to invest is exactly what the economy needs. Supply chains and staffing issues may take the edge off in the near term.

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