Weekly Market Watch Newsletter

Last weekend at the 2025 Jackson Hole Economic Symposium, the Federal Reserve (Fed) found itself at a critical juncture marked by political pressures, personnel changes, and internal divisions over monetary policy direction. Markets have positioned for dovish signals with 85% odds of a September rate cut, but historical patterns suggest Jackson Hole speeches often trigger reversals. The Fed’s simultaneous management of interest rate policy, personnel changes, quantitative tightening, and mounting political pressure from the White House represents an unusually complex policy environment. 

Topics of the Week:

• Potential for Rate Cuts: Markets have priced in an 85% probability of a September rate cut, following softer employment data and increased unemployment, which could bolster markets in the near term. 

• Uncertainty Removal: Federal Reserve (Fed) Chair Jerome Powell’s well-telegraphed, dovish-leaning statement in Jackson Hole helped remove some of the uncertainty plaguing investors around the Fed’s rate-cutting path. 

• Fed's Balance Sheet Normalization: The Federal Reserve's balance sheet reduction continues, with over $2 trillion in reductions since June 2022, and is expected to continue throughout 2025. 

What We Are Watching:

•  Monetary Policy Uncertainty: The Federal Reserve faces political pressures, personnel changes, and internal divisions over monetary policy, creating uncertainty in fixed income markets. 

• Tariff and Inflation Risks: Ongoing tariff threats and inflation risks continue to cloud the outlook for economic and corporate profit growth. 

• Historical Seasonal Weakness: Markets may experience volatility due to historical seasonal weakness during the late summer period.