Weighing The Week Ahead: A Message From Jackson Hole?

The economic calendar is light, and many are already on vacation. Even actual economic news has not competed with the ‘what can we talk about on a slow Friday’ story over the last few weeks. The real news this week begins with the FOMC minutes on Wednesday and ends with Chairman Powell’s speech Friday morning. Many traders would prefer a two-day week. It might seem like that. Expect the punditry to be asking: Will there be a message from Jackson Hole?

Last Week Recap

In my last edition of WTWA I warned that there were many efforts to hijack the financial news agenda – and your ears and eyeballs along the way! In particular, I barely mentioned the Turkey non-story, which I described as a headline lacking substance. Just as I suspected, Turkey was the focal point of every market blip – but only for a few hours. What would be the “contagion?” intoned some newly-created Turkey experts, who looked up a few facts in an almanac. I was prepared to write the entire summary (before I put “mute” back on) but Bill Kort did such a clever and humorous version, we should just read his post. He recounts the various media flashes and stories. Here is an example:

Contagion is a favorite word the media uses when brewing up a crisis in your mind. Yes, there could be other countries that could be swept up in the current frenzy over Turkey’s finances. This, too, would not be the end of the world. Since this run in stocks began over 9 years ago (the S&P 500 has almost quadrupled) there have been multiple potential contagion stories – Greece (2 or 3 times), the PIIGS (Portugal, Ireland, Italy, Greece and Spain) and Cyprus. CNBC even takes this into account in the headline for an August 13, post– ‘What happens in Turkey won’t stay in Turkey’: Why this debt crisis could be different. They just won’t let this story go. Here is another post from this AM – “Charts of past currency crises show Turkey may have a lot more pain to face.”

This is exactly why I warned people not to fall victim to those framing the news. Usually I focus on what to watch. Last week it was about what to ignore.

Warning: This paragraph contains some optional OldProf humor... I need to have a little fun while writing, so please provide a little slack.

Yes, the idea was sparked by Turkey. In this case we were going to consume turkey at a family gathering in Wisconsin. Mrs. OldProf is an excellent cook, but she had the ‘help’ of her two sisters. From my writing corner, I noted a disagreement among the sisters – never good, and not something that invites more participants. With a vested interest in dinner, I discerned that there was disagreement about thawing, cooking times, and turkey weight. The disparate views seemed extreme to a non-expert like me. I have expertise, but it is specialized in recognizing and enjoying a great turkey dinner.

Here is the strange point of connection with last week’s market, which merely happened to involve Turkey. Decades ago I realized that I could never be an expert at everything. By learning how to learn I could become expert at finding experts. When someone comes on CNBC or has a print article, I check out their background, references, possible policy biases. All “experts” are not equal, and some are purely imposters. This week we will see the Turkey experts remove their masks and become Fed experts.

But back to dinner. I dialed a number on my phone. When it was answered, I handed it to the nearest sister. She heard, “Butterball hotline. May I help you?”

I will never know whether my efforts made any difference to the cooking time decision, but dinner was delicious.

The Story in One Chart

I always start my personal review of the week by looking at a great chart. I especially like the version updated each week by Jill Mislinski. She includes a lot of valuable information in a single visual. The full post has even more charts and analysis, including commentary on volume. Check it out.

The market gained 0.59% on the week and is less than one percent from the all-time highs. The chart reflects opening gaps from news events while US markets were closed. The range for the week was about 1.9%. I summarize actual and implied volatility each week in our Indicator Snapshot section below. Volatility remains well below the long-term range.

The News

Each week I break down events into good and bad. For our purposes, “good” has two components. The news must be market friendly and better than expectations. I avoid using my personal preferences in evaluating news – and you should, too.

When relevant, I include expectations (E) and the prior reading (P).

The Good

  • Mortgage delinquencies at multi-decade lows (Bespoke).

  • Small Business Optimism as measured by the NFIB Index up ticked again to 107.9. Supply-side economist Scott Grannis notes the crucial role business investment plays in moving economic growth to a higher level. While he does not mention my “delicate balance” terminology, he does acknowledge tariffs as a current but temporary roadblock. Instead of showing the entire index, let’s look at the hiring plans component.
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Disclosure: [This is a crucial time for investment decisions. If you are flying solo, you might want to request my papers on risk or the top pitfalls for individual investors. If you are concerned ...

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