The highlight of economic news this week will be Fed Chair Jerome Powell’s speech on Friday at the Fed’s annual Jackson Hole Summit. In advance, the drumbeat about fighting inflation is in full effect with Fed officials like James Bullard making speeches advocating another 75-basis point increase in the September meeting. While there have been some signs of inflation easing with the recent CPI release, expect the staunch rhetoric to continue in Powell’s release as beating down inflation remains the Fed’s priority.
The good news for investors is that the quick upward jolt in short-term rates has made some parts of the bond market attractive. We are seeing value in the short end of the curve as rates on two-year treasuries are 3.3%. Accordingly, treasury notes have become more attractive with their short duration which makes them less susceptible to more rate hikes and they counter stock exposure. Watch the personal consumption, producer price and consumer price indexes in the coming weeks to confirm the direction of inflation. If that data shows weakening inflation, the end of this hiking cycle could be near. As always, I appreciate the continued trust and confidence.