ROIC Academy Alert - Read This Before Friday

Good morning Academy members. I am back from my vacation in Thailand just in time for Jackson Hole.

Tomorrow the annual Jackson Hole Economic Policy Symposium hosted by the Kansas City Fed kicks off. Every year is given a theme, and this year the symposium will have the reflective topic of "Reassessing the Effectiveness and Transmission of Monetary Policy." This is total BS, as the real topic needed to be "25 or 50 basis point cut and 3 or 4 cuts in 2024".

While the event goes until Saturday, Friday will be the only day that matters, as Powell is scheduled to speak at 10 AM EST.

I have posted some thoughts on the setup before his talk, you can read it in the message board room here on discord. Here are some in depth views, exclusively for ACADEMY members.

The S&P 500 is up 18% year to date. With the exception of 2021, when the index was up 19.7% YTD before Jackson Hole, 2024 so far has been the best year to date performance in the lead up to Jackson Hole since 2000, and the 9th best of all of 47 years since the symposium began. While the S&P 500 has usually moved higher surrounding the symposium, this year has some contingencies worth mentioning.

Currently, Fed Funds Futures are pricing in a cut at the September meeting with Fed communications all but confirming that will be the next move. As shown in the table below, over the past 30 years, there have been six other years in which Fed Fund Futures were pricing in a rate cut at the first meeting post-Jackson Hole.

Of those instances, markets were correct in their prediction four of the six times. Additionally, two of those were the first cut after a tightening cycle: 1998 and 2007. While performance leading up to Jackson Hole has been positive this year, historically the index has risen only a third of the time during the symposium, with an average decline of 1.37% over the few days Jackson Hole takes place.

The SP500 has also averaged declines the next 3 week period after the last day of Jackson Hole so be very cautions trading around the event folks.

On the other hand, this year may be a complete different story. We know Powell is expected to be extra dovish. The FOMC minutes support this case as well. Inflation is falling hard, while the unemployment data is getting worse, pushing the FED into an extra dovish position. In 2023 Powell said things are better, and we got a 4% rally on the SP500. So anything can happen...