Jackson Hole Symposium to Reassess Policy

Jeffrey Roach:

Hi, I am Jeffrey Roach, Chief Economist for LPL Financial, with an update on what's happening in the global markets and the call to action for investors. First, the Fed will reassess monetary policy this summer after such a long period where higher interest rates have not created as much pain as anticipated. The Fed just announced the topic for their summer conference in Wyoming. The Jackson Hole Symposium for Global Central Bankers will reassess the effectiveness and overall transmission of monetary policy in this post-pandemic world. This will be very important. Investors and market watchers should expect Chair Powell and other leaders to talk more and more about the challenges of monetary policy in a world less sensitive to interest rates. Second, the domestic economy is most likely late cycle, and we do expect activity will slow late this year as the conference board and the University of Michigan both revealed that most consumers have pivoted away from big-ticket buying plans.

Jeffrey Roach:

These changes in buying plans could have knock-on effects in other categories of spending. Investors should anticipate a forthcoming downshift in consumer activity. Now, granted upper income households still have plenty of spending ability thanks to cash freed up from refinancing following the onset of the pandemic. That's why business activity might not actually slow till much later this year and into next year. Third, services inflation is past peak after an unusual spike in January. The monthly pace of services inflation in April slowed down to the lowest since November last year. And goods prices are also slowing down and showing signs of improvement. Now, it's been roughly a year since consumers experienced a smaller grocery bill, and despite the normalization of some prices, consumers are still paying more than pre-pandemic prices. But the good news is this, inflation cooled last month, especially for several major grocery store items. Meat, fruit and vegetable prices outright declined in April, giving those healthy consumers some reprieve. Now, although inflation in April eased a bit, markets and policymakers alike still need more confirmation that the trajectory is favorable for the long run 2% target. Now in general, the Fed's policy committee believes policy is indeed restrictive, and so the next move for the Fed will likely be a cut later this year. Well, that's all for now. If you want more insights on global market trends, follow us on social media and take care.