Wyoming Matters: 3 Potential Rallies Post-Jackson Hole

It happens every year. The economic world’s rockstars gather in Jackson Hole, Wyoming for a policy symposium presented by the Federal Reserve Bank of Kansas City. This year’s event, from Thursday through Saturday this week, is titled “Reassessing the Effectiveness and Transmission of Monetary Policy.”  

“Yeah, whatever! Just tell us what Fed Chairman Jerome Powell is going to say on Friday when he speaks, and how it will move the markets" may summarize financial advisors' and self-directed investors' sentiment as the event nears. While the agenda will be riveting (and the cocktails flowing), to those of us on the outside, this annual event represents a rare late summer Friday where we need to pay close attention to our market monitors.

The Fed has used this event to signal significant shifts in policy in years past. And while that is not expected this week, as with so much in today’s markets, what is said is secondary to the “Wall Street narrative” that comes out of it. And it turns out the markets are already starting to carve out the start of what could be directional moves.  

Maybe these are in anticipation of what Powell will say, or maybe they are more organic. Either way, here are three trends I am starting to see develop. That is, three rallies that might “have legs.” Not in the way a Jackson Hole resident moose, wolf or bear does. But in the way that a trend that starts can go a long way eventually. Look back no further to the “Artificial Intelligence” (AI) rally from last year.  

3 Early-Stage Market Trends as Jackson Hole Arrives

I’ve been a stock and fund chartist for “only” 44 years, and so there are times when things just jump out at me as trends in motion that seem to be gathering momentum. In baseball they say, “momentum is only as good as tomorrow’s starting pitcher,” and in investing, especially now, trends can develop, rally and peter out a lot faster than before.

But when it comes to long-term bonds, such as those reflected in the $61 billion iShares 20+ Year Treasury Bond ETF (TLT), some downward price trends have arguably been broken, which is another way of saying that long-bond ETFs like TLT could be setting up to move strongly higher in the coming months, and into next year. While the Fed controls short-term rates, long bonds tend to react as well. So, this makes some intuitive sense with Jackson Hole and then a Fed meeting in September approaching.

Low Energy No Longer?

It seems like Wall Street pundits have been rooting for a sustainable rally in fossil fuel stocks for a long time. The $37.5 billion SPDR Select Sector Energy ETF (XLE) is perking up, rallying about 7% since the day many sectors bottomed out in early August. Powell’s speech Friday comes at a time when existing wars are intensifying and expanding, while others threaten to emerge. And many involve oil-producing nations. So, this new uptrend also some fundamental backing.

And, speaking of sectors that had very little oomph for a while but show signs of being leaders again, consumer staples, represented by ETFs like the SPDRs Select Sector Consumer Staples ETF (XLP) have trended straight up for the past 11 months. If that sounds pricey, consider that XLP is just now finally recovering its price high of April, 2022.

Happy hunting for ideas as Jackson Hole approaches.