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Fed Jackson Hole symposium could shape investor sentiment

WEEKLY MARKET COMMENTARY  | 

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Stock market gains continued last week on strong housing data. This week we will see a spate of additional housing data that will likely come in at or above investor expectations. In addition to the housing data, fresh information on the pace of firings, durable goods orders, consumer sentiment and the second estimate of second quarter gross domestic product (GDP) are on tap. On the international front, keep an eye on euro-area purchasing managers’ indexes and the first estimate of second quarter GDP in the United Kingdom.

Federal Reserve (Fed) Chair Janet Yellen will deliver the keynote at the Kansas City Fed’s annual monetary symposium in Jackson Hole, Wyoming. The title of the conference is “Designing Resilient Monetary Policy Frameworks for the Future.” In this speech, Yellen is expected to discuss what a slower path of growth and a lower neutral interest rate means for Fed policy. By doing so she is acknowledging that the U.S. economy may have fallen into what economists refer to as secular stagnation. If so, this requires a very different policy mix than the one now in place. This could involve targeting GDP, a higher inflation target, issuing 50-year debt by the U.S. Department of the Treasury and much more aggressive fiscal support for the economy.

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