Hello! In light of Jerome Powell’s consequential speech in Jackson Hole today, we’re sharing a special afternoon dispatch on how asset prices are reacting to the updated Fed outlook.

(Hint: Hold on to your hats.)

The Fed is ready to cut rates in September and asset prices are going higher.

That’s the short takeaway of Jerome Powell’s speech in Jackson Hole, Wyoming on Friday.

While the minutes from the July FOMC meeting released Wednesday underscored tariff-related inflation concerns, Powell’s speech Friday confirmed that his team is now focused on the deteriorating labor market.

“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said. 

He acknowledged that even if the effects of trade policy are still making their way through consumer prices, the overall impact could be more short-lived than anticipated. 

“Evidently last month’s poor employment report has been enough to dissuade Powell from his intransigence on lowering rates for fear of tariff induced price pressures,” said Steve Wyett, chief investment strategist at BOK Financial. 

Markets responded immediately with renewed anticipation for lower borrowing costs. 

By midday Friday, the S&P 500 and Nasdaq Composite each traded more than 1.5% higher, and the Dow and Russell 2000 gained 2.1% and 3.8%, respectively. 

Meanwhile, bitcoin climbed 3.6% and ether spiked 12.1%. 

“To use the old Fed-analogy, the party isn’t over yet and Jay isn’t ready to take away the (spiked) punch bowl,” said Chris Zaccarelli, chief investment officer for Northlight Asset Management. 

As it turns out, rate cuts have historically coincided with double-digit returns over the next 12 months for stocks.

Across all cycles, the S&P 500 has averaged 9.7% gains after the first cut.

Technically, a September rate cut would mark the second cut in this specific cycle, given the first one happened at the end of 2024.

That said, data from Ryan Detrick of Carson Research shows that the S&P 500 is higher 10 of 11 times when the Fed takes between 5 and 12 months between cuts. 

But the best investors will still see outsized returns. Join our Best Ideas Club to unlock access to our members-only stock tracker, where you can our high-conviction portfolio that’s up almost double the S&P 500 this year.

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📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

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