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Powell's Jackson Hole Speech Unsettles Markets

Powell's Jackson Hole Speech Unsettles Markets

| August 31, 2023

If it feels like the financial markets are lurching from news event to news event in recent weeks, you’re right. They are.

The markets were on pins and needles waiting for Fed Chair Powell to deliver his talk at the Jackson Hole event.

A few days earlier, markets anxiously awaited the Q2 report from a leading player in artificial intelligence. “I cannot remember the last time there was this much excitement for an earnings report,” wrote Charles Payne, CEO & Principal Analyst at WStreet.com.

When overall trading is thin (like in August when many investors are on vacation), the market is prone to sharp moves one way or another. After Labor Day, school will be in full swing, and most market players will be back at their desks.

Does that mean volatility will slow? Not necessarily. The markets will have plenty to worry about in September and October before shifting its focus to year’s end.

In today’s chart, you can see that total cash on the sidelines has climbed to almost $1.6 trillion. The chart shows me that 2022 scared a lot of investors, and they haven’t recovered yet. Right now, that money is invested in other tools because interest rates are so high. But at some point next year, I expect rates will start to trend lower. What will happen if that money starts looking for a new home?