Remembrances of Jackson Holes Past

On Thursday, the Federal Reserve will be holding another big meeting in Jackson Hole, Wyoming. Janet Yellen will be skipping this year’s meeting, but it’s still going to get a lot of attention.

Gary Alexander of Naveller Marketmail points out that the market has often reacted well after Jackson Hole.

Jackson Hole has become an annual rallying point for the stock market over the last few years. Since 2009, the market has responded favorably whenever some real news comes out of Jackson Hole. From 2010 to 2013, Federal Reserve Chairman Ben Bernanke made monetary history at Jackson Hole. He often announced (or paved the way for) a major Fed policy change at this time. Here’s a brief summary:

The 2010 Jackson Hole conference was held August 26-28. In his August 27 talk, Mr. Bernanke said that the pace of economic growth had been “less vigorous” than the Fed was expecting and the pace of the U.S. job growth was “painfully” slow. He also acknowledged that the Fed was surprised by the “sharp deterioration” in the U.S. trade balance. His solution was to revive the Fed’s late-2008 “quantitative easing” (QE) scheme. The market loved QE2: The S&P rose from 1040 on the day of Bernanke’s Jackson Hole talk to 1363.6 the following April – up 31%.

The 2011 Jackson Hole conference was held August 25-27, during an especially volatile month in market history. At Jackson Hole, Chairman Bernanke laid out the groundwork for another new Fed monetary strategy called “Operation Twist.” The detailed plan was not officially announced until September 21, but over the next month or so, various Fed governors hit the road to explain and defend their $400 billion operation to artificially flatten the yield curve. The stock market loved Operation Twist. The S&P 500 rose over 26% from August 2011 to April of 2012.

The 2012 Jackson Hole conference, held August 30 to September 1, laid the groundwork for QE3, which was officially launched on September 13. Bernanke’s Jackson Hole remarks were more frank than usual. First, he said that the stagnant job market was a “grave concern” to the Fed. He also called current economic growth “far from satisfactory” and “tepid.” Because of this slow growth, Bernanke said that the Fed will “provide additional policy accommodation as needed.” This was a broad hint that more easing (dubbed QE3) would soon follow. The market seemed to love QE3, as the S&P 500 rose by over 17% from its August lows to April of 2013.

The 2013 Jackson Hole conference was held August 22-24. By then, Chairman Bernanke was a lame duck, so he let his replacement (Janet Yellen) speak in his place. Strangely, she did not say much, except as part of a panel. Since the skies were smoky around Jackson Hole, due to all of the fires in Idaho, the inside joke was that Jackson Hole’s skies reflected the foggy future of the Fed, especially since Bernanke’s hints of “tapering” (uttered in May) were spooking the markets. In the end, tapering failed to faze the market, with the S&P 500 rising 16% by April of 2014.

Last August (2014), as noted above, Ms. Yellen tried to reassure investors that the Fed might not raise rates as soon as they expect and the market managed to eke out an 11.6% gain by May 2015.

Posted by on August 25th, 2015 at 9:54 am


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