A speech in a tiny Rocky Mountain resort town next week will give investors clarity on the interest rate outlook, at a time when stocks are mounting a recovery rally from this month's market storm. Federal Reserve Chair Jerome Powell will speak in Jackson Hole, Wyoming, population 10,698, next Friday morning , addressing an annual economic policy symposium just three weeks after a July Fed meeting bolstered investor confidence that a September rate cut is "on the table." But those interest rate expectations have since been shaken up. A disappointing nonfarm payrolls report on Aug. 2 spurred fears of slowing growth, implying bigger and more frequent cuts to keep the economy from a recession. This week, however, a strong retail sales report, and softer inflation data, helped allay those growth concerns. Now, Powell will get a chance to address the recent flood of data. A more dovish turn to adjust to any "unexpected weakness" in the labor market, as Bank of America's Michael Gapen put it in a note this week, has the potential to be a market moving event. "I think Jackson Hole is going to set a positive tone on balance just because the evidence is growing FOMC members want to be forward looking," Fundstrat's Tom Lee told CNBC's " Squawk on the Street " on Friday, referring to the central bank's policy-setting Federal Open Market Committee. .SPX 5D mountain S & P 500 over the past five days. To be sure, markets may have already more than priced in any dovish expectations. By the end of the year, markets are now signaling a significant drop in the key fed funds lending rate, by one full percentage point to 4.25%-4.50%, from the current 5.25%-5.50%, according to the CME FedWatch Tool . "Any time Chairman Powell has a chance to speak extemporaneously to answer questions, I think that could be a market mover," said Brian Mulberry, client portfolio manager at Zacks Investment Management. "Will it be? I think he's a very adept individual at saying a lot and revealing nothing, so I would expect more of the same." Powell is set to speak at 10 a.m. Friday at the 2024 Jackson Hole Economic Policy Symposium, which draws central bank policymakers from around the world to discuss economic issues under the auspices of the Kansas City Fed. The symposium runs from Thursday, Aug. 22 through Saturday, Aug. 24. New all-time highs, or time to trim positions The good news on the economic front this week has many investors expecting that the stock reaction on Aug. 5 to the disappointing July jobs report, and the unwind of the yen carry trade, was largely overblown. On Friday, the S & P 500 posted its best week of 2024 as it recovered from last week's violent rout, up about 4%. What's more, the S & P 500 appears ready to clear new all-time highs, now that it's roughly 2% away from the record it set in July. Investors optimistic the U.S. is headed for a soft landing — where inflation slows, the economy expands and continues to add jobs — say that the market is about to get another important boost when the Fed finally starts to cut interest rates. It's an event that could power stocks, as in 1995 when the Fed managed a soft landing when inflation was also easing. In a note this week, Wells Fargo said the S & P 500 surged more than 40% in the 18 months following Fed chair's Alan Greenspan's first cut in that economic cycle. Goldman Sachs this week urged investors to "keep the faith" the U.S. will avoid a recession, saying investors shouldn't get too defensive — though it did recommend to "keep fading the extremes." Still, wary market observers say investors should be positioned for further volatility. They point to wild swings in the CBOE Volatility Index (VIX) — otherwise known as Wall Street's fear gauge — as a troubling signal for markets. The VIX is back around 15, after spiking above 65 last Monday, suggesting investors have shifted back to a risk-on position. .VIX 1M mountain VIX over the past month. "We've gone from almost like fear in a week to maybe even complacency," said Ken Mahoney, CEO of Mahoney Asset Management. Mahoney expects it's time for investors to sell into this week's rally, and start reducing their exposure to stocks in advance of more volatility. In particular, he expects traders could start trimming their exposure to the mega-cap tech stocks that have recently run up as traders bought up the dip. As of Friday's close, Nvidia is now more than 37% above its Aug. 5 intraday low. Meta Platforms is higher by roughly 17%. Tesla is up by more than 18%. The tech-heavy Nasdaq is more than 12% higher. "Anyone that was buying last week, even though it was kind of ugly, can consider maybe selling some pieces off into this rally," Mahoney said. "Take some money off the table, so when we do have these awful days, plural, like we did last week, and especially that Monday, you have some powder dry and do something with." "I say it because some investors, I feel like they're always, like, 100% invested, and they don't have the flexibility when we have a big move down," Mahoney added. "So, you can make volatility your friend or your foe." Next week, investors will continue to pore over data tied to the consumer and the labor market, with weekly continuing and initial unemployment claims data, as well as earnings results from retail chains such as Target and TJX Companies. The Democratic National Convention also kicks off next week, starting Monday and continuing through Thursday, as the campaign for the U.S. presidential election in November gathers steam. July meeting minutes from the FOMC are also on deck. Week ahead calendar All times ET. 2024 Democratic National Convention Aug. 19-22 2024 Jackson Hole Economic Policy Symposium Aug. 22-24 Monday Aug. 19 10 a.m. Leading Indicators (July) Earnings: Palo Alto Networks , Estee Lauder Tuesday Aug. 20 Earnings: Lowe's Wednesday Aug. 21 2 p.m. FOMC Minutes Earnings: TJX Companies , Analog Devices , Target , Raymond James Financial Thursday Aug. 22 8:30 a.m. Chicago Fed National Activity Index (July) 8:30 a.m. Continuing Jobless Claims (08/10) 8:30 a.m. Initial Claims (08/17) 9:45 a.m. PMI Composite preliminary (August) 9:45 a.m. Markit PMI Manufacturing preliminary (August) 9:45 a.m. Markit PMI Services preliminary (August) 10 a.m. Existing Home Sales (July) 11 a.m. Kansas City Fed Manufacturing Index (August) Earnings: Intuit , Ross Stores Friday Aug. 23 8:00 a.m Building Permits (July) 10 a.m. New Home Sales (July)
