The Time Has Come for Lower Interest Rates

Last Edited by: LPL Research

Last Updated: August 23, 2024

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Jeffrey Roach:

Hi, I am Jeffrey Roach, Chief Economist for LPL Financial, with an update on what's happening in the global markets and a call to action for investors. First, the time has come for lower interest rates. Central bankers from around the globe meet annually in Jackson Hole, Wyoming to discuss the global economy. And the event gets a lot of media hype, and for good reason since the event is often used to introduce new policy ideas. Here are a few highlights from Powell's Jackson Hole speech. Powell specifically highlighted the labor market 27 times, indicating the current focus for the Federal Open Market Committee. He surprisingly talked a little bit about the transitory hypothesis and tacitly defended the argument for that view. A soft landing does look achievable, barring any shocks. Bottom line, one of the best concepts in Powell's speech for investors to understand is the current data show an evolving macro landscape.

Jeffrey Roach:

Well, the jury is still out if the Fed can successfully manage the risks to both sides of their dual mandate. However, Chairman Powell could not be more clear. The time has come for policy to adjust. Second, the job market is cooler than originally thought. The labor market appears weaker than originally reported, as you see in this chart. A deteriorating labor market will allow the Fed to highlight both sides of the dual mandate, and investors should expect the Fed to prepare markets for a cut in September, and a weaker than expected job market could pave the way for the Fed to cut by a full 1% by the end of the year. But here are a few things to note. The massive revision suggests that 2023 was returning to what the labor market looked like before the pandemic. Industries with the largest negative revisions were professional services and hospitality sectors. In contrast, transportation and warehousing industries are expected to be revised higher. And it's not surprising that the leisure and hospitality sector is the most volatile. Well, that's all for now. If you want more insights on global market trends, follow us on social media and take care.

 

Dr. Jeffrey Roach, LPL’s Chief Economist, gives key takeaways from the Jackson Hole Economic Symposium and the recent revisions to payrolls.

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