🚨 Attention, Fed Heads! Jackson Hole Countdown: Powell to Unveil Fate of Markets!

Good Morning!

Markets consolidate after a stellar week, eyeing soft landing and potential Fed easing; riding high on optimism, betting on a Goldilocks economy. S&P 500 and Nasdaq futures are inching up, while the euro and sterling flex against the dollar. Fed chatter hints at September easing, with all eyes on Powell's Jackson Hole speech. Japan's inflation report might spice things up for BOJ watchers. Meanwhile, betting markets are now favoring Kamala Harris. What a twist!

In today’s email:

• FedWatch: Attention shifts to the Fed’s Jackson Hole symposium later this week.

• Bitcoin: Bitcoin sitting under $59k, awaiting Fed minutes

• Goldman Sachs: lowers odds for a US recession from 25% to 20%

• Gold: New record at $2500/oz, Outside Money 🚀

👇Join: Our exciting community subreddit to join the conversation:

THE BIG IDEA

Powell's Jackson Hole speech could make or break the stock market's recent rally

All eyes are on Fed Chair Jerome Powell as he prepares to take the stage at the Jackson Hole Economic Symposium. Market watchers are betting big that Powell will set the stage for a September rate cut, but if he zigs when everyone expects him to zag, it could spell trouble for the market's recent bounce.

Historically, the stock market's reaction to Fed speeches at Jackson Hole has been relatively muted, with the S&P 500 averaging a 0.4% return during the conference over the past two decades. But this year's stakes are higher. After a period of extreme volatility and shifting rate expectations, investors are hungry for clarity.

ING's James Knightley expects Powell to highlight inflation's downward trend and signal a potential pivot towards prioritizing employment. However, Interactive Brokers' Steve Sosnick warns that investor expectations might be too lofty.

If Powell merely hints at modest rate adjustments rather than the aggressive cuts the market's pricing in, it could burst the bubble

The market's recent rebound looks fragile, with bad economic news now being taken at face value rather than as a potential catalyst for rate cuts. U.S. stocks ended last week on a high note, but this rally could be on shaky ground depending on Powell's tone.

Beyond Powell's speech, investors will be eyeing the Fed's July meeting minutes and jobless claims data. A potential wild card? The Bureau of Labor Statistics' preliminary annual benchmark revision to its March payrolls survey. A significant downward revision could force the Fed to reassess its labor market narrative and potentially justify a more dovish stance.

In this high-stakes game of monetary policy poker, Powell's hand could make or break the market's momentum.

MARKETS AT A GLANCE

TOP NEWS

Treasury futures see record short bets as traders anticipate rate cut shifts

The bond market's buzzing with bearish energy. Short bets on five-year Treasury futures hit an all-time high, while 10-year shorts reached levels not seen since January. What's driving this? A rebound in yields, improved economic data, and hotter shelter inflation are making traders rethink their rate cut expectations. The Fed's September move? A 25 basis point cut looks more likely now than the 50 some had hoped for.

Goldman Sachs reduces U.S. recession odds to 20%, citing positive economic indicators

Wall Street's crystal ball is getting a bit rosier. Goldman Sachs just trimmed its U.S. recession forecast from 25% to 20%. Why? July's data and early August numbers are showing no signs of an economic stumble. Jobless claims hit a one-month low, and retail sales had their best showing in 18 months. If August's jobs report impresses, we might see those odds drop to 15%. The Fed's next move? A 25-point cut looks likely, but don't rule out 50 if jobs disappoint.

Oil prices dip on China demand concerns, while Middle East tensions keep a floor under prices

Oil's starting the week with a bit of a slump, with Brent and WTI both down 0.2%. China's economic hiccups are spooking traders, as new home prices tumble and industrial output slows. But don't count oil out just yet - Middle East tensions and the Russia-Ukraine conflict are keeping supply risks on the table. Meanwhile, U.S. Secretary Blinken's in Tel Aviv pushing for a Gaza ceasefire. It's a delicate balancing act for black gold.

CRYPTO

BlackRock's crypto ETFs dethrone Grayscale as the largest in the space, amassing over $21.6 billion in assets

Move over, Grayscale - there's a new crypto fund king in town. BlackRock's IBIT and ETHA funds have just edged past Grayscale's offerings, with a cool $21.6 billion in digital assets under management. Wall Street's warming up to these newcomers, with Morgan Stanley and Goldman Sachs shifting millions into IBIT. The cherry on top? IBIT's only seen one day of outflows since launch. Looks like institutional investors are betting big on BlackRock's crypto play.

Bitcoin's implied volatility surges post-halving, indicating increased speculative trading

Bitcoin's rollercoaster ride is getting wilder. The 1-week implied volatility, a key market sentiment indicator, has been on a tear in 2024. After hovering around 50% early on, it skyrocketed above 80% near the April halving. Post-halving, we're seeing more frequent spikes compared to 2023's calmer waters. What's driving this? A cocktail of regulatory uncertainty, macro shifts, and post-halving jitters. Buckle up, traders - Bitcoin's wild ride shows no signs of slowing.

Analyst doubts Bitcoin dominance will return to 70%, predicts peak at 60% by year-end

Crypto guru Benjamin Cowen's crystal ball isn't showing Bitcoin reclaiming its throne at 70% market dominance. His target? A more modest 60%, likely hitting that mark between September and December. Why the skepticism? Cowen sees room for Ethereum and other cryptos to flex their muscles. Meanwhile, trader Kaleo thinks we might've already seen Bitcoin's dominance peak this cycle. The crypto landscape's evolving, folks - it's not just a Bitcoin show anymore.

75% of Bitcoin unmoved for over 6 months despite price drop, signaling strong hodler sentiment

Hodlers are holding tight! Despite Bitcoin's 21% tumble from its peak, a whopping 75% of all BTC hasn't budged in over six months. This diamond-handed behavior suggests long-term investors are playing the long game, possibly eyeing future gains. But here's the kicker - over 80% of short-term holders are underwater. Could we see a panic sell-off like in previous years? The Fear & Greed Index is flashing fear, but hodlers seem unfazed. It's a high-stakes game of crypto chicken.

GOLD

Gold surges past $2,500/oz for the first time, fueled by rate cut expectations and geopolitical tensions

Gold's shining brighter than ever! The precious metal just smashed through the $2,500/oz ceiling, a historic first. What's driving this golden rush? A cocktail of Fed rate cut whispers, disappointing U.S. housing data, and global jitters. With the Fed potentially slashing rates to 3.5% by next summer, gold's allure is only growing. Toss in geopolitical wildcards and the looming U.S. election, and we've got a recipe for more glitter ahead.

DAILY ECONOMIC CALENDAR (ET)

MEME OF THE DAY