All Eyes on Jackson Hole and the Economy

Last Edited by: LPL Research

Last Updated: August 21, 2023

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Jeff Roach (00:02):

Hi, I am Jeffrey Roach, Chief Economist at LPL Financial, and in this edition of the Econ Market Minute I'll share three key takeaways for investors. First, excess savings and use of credit have so far staved off recession. The Conference Board's Leading Economic Index fell for the 16th consecutive month, but no recession. And why not? There are at least two reasons that a recession has not yet materialized. In the past two years, consumers had plenty of excess savings and had a willingness to use credit to support spending. Investors must come to grips with the uniqueness of this economic cycle. This time is different. Normally the economy would be in recession when the Conference Board data looked this frail. Second, we read in the Fed's minutes last week that officials are nervous about the unknown cumulative impact of monetary policy tightening. Tighter credit conditions will eventually dampen economic activity, and markets are choppy from the uncertainty.

 

Jeff Roach (01:07):

Our baseline is the Fed will not likely alter rates at the next meeting, but the following meeting's decision is yet to be determined. Treasury yields are hitting new highs as investors reset expectations about long-term inflation. Third, and possibly most important, tune into this year's Jackson Hole symposium. Investors need to keep an eye on the upcoming Jackson Hole event as global policy policymakers focus on structural shifts in the global economy, one debate will likely be over the persistence of higher inflation. The other hot topic will likely include a potential downshift in long run growth amid an aging population. Remember, Chairman Powell used the 2020 symposium to announce the tweak to the central bank's approach to inflation targeting. Well, that's all for now. Follow me and the LPL Research team on social media and take care.

In this week’s Econ Market Minute, LPL’s Chief Economist Jeffrey Roach talks about how excess savings and use of credit have staved off a recession, the uncertain effect of monetary policy tightening, and the upcoming Jackson Hole symposium, where global policymakers will debate the persistence of higher inflation and a potential downshift in long run growth.

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