We head into the last week of August and summer holidays with markets likely to digest Fed Chair Powell’s speech from Jackson Hole. There will be a lot of inflation data, out of Australia, European countries and the US to watch, while Nvidia second quarter earnings is now a big risk event, on a par with any top tier economic data release. Price action hasn’t been especially choppy over the past few weeks, with the VIX volatility measure, known as Wall Street’s fear gauge falling through August to levels below the long-term average. We head into a new month, with September traditionally being seen as a volatile one for risk markets especially.
Jackson Hole didn’t disappoint in terms of market reaction as Powell opened the door to a September Fed rate cut. The build-up had seen stocks sell-off and the dollar go bid in anticipation of a moderately hawkish Powell and push back against the high chance of a September move. But ultimately, the Fed Chair put greater emphasis on the weakening labour market over rising inflation and a possible one-time price adjustment due to tariffs. We still have one more NFP and CPI report before the mid-September FOMC meeting, but markets are pleased with the dovish pivot with stocks rebounding strongly and looking likely to print fresh record highs this week. On the flip side, the dollar may continue to struggle further, with weaker growth momentum and unsustainable fiscal policy adding to the mix.
Of course, stocks will have one eye on the release of the results from the biggest company on the planet, after the US closing bell on Wednesday. Nvidia represents roughly 8% weight in the benchmark S&P 500 and was the first business to top $4 trillion in market value. It is the AI bellwether regarding demand and spending and where Nvidia goes, so does the market. That means investors will particularly focus on any chat around the demand side after other megacap tech stocks recently upped their capex guidance. Comments around the impact of the deal with the Trump administration which gives the government 15% of revenue from China sales will also be key.