Jackson (W)Hole Lotta Hype
by Murray Gunn
Updated: August 24, 2017
This week, the great and the good from central banks around the world gather in Jackson Hole, Wyoming for the annual Kansas City Fed Economic Policy Symposium, where Fed Chair Janet Yellen and ECB President Mario Draghi are both making speeches. The meeting has become the "Davos for central banks," referring to the annual World Economic Forum held in Switzerland every January where global business leaders and politicians meet to discuss topics of the day. Like Davos, the world's financial media hang on every word that comes out of Jackson Hole in the hope that something meaningful will be said.
The Kansas City Fed annual gab-fest inaugurated in 1978 but really only started to become popular after 1982 when they moved it to the wilderness of Jackson Hole and persuaded the then-Fed chairman Paul Volcker, a keen fly-fisherman, to attend. Since then, herding behavior (or is it just ego?) has resulted in it becoming the most sought-after ticket for the central banking community. Both Davos and Jackson Hole have become icons of the financial age.
But does Jackson Hole really matter? It's normally held in late August, and so we have taken a look at the price action of major markets from 25 August to 10 September each year.
The data shows that from 1982, during the period from the 25 August to 10 September, on average, the US Dollar index (DXY) has rallied by 0.44%, the US Treasury 10-year yield has fallen by 3 basis points and the S&P 500 has fallen by 0.69%. In other words, pretty close to zero net movement for each asset class. It's the same story over the last 10 years. In the period immediately after the Jackson Hole meeting, no discernible volatility occurs. One could make a case that the period has an historic bullish skew for the US dollar (which does happen to fit our current Elliott wave analysis), but it would be clutching at straws.
Mike Bloomberg is famous for saying, "In God we trust; everyone else bring data." Well, the data suggests that whatever happens at Jackson Hole this week, it's best not to get too excited about it. Far better to navigate the markets using Elliott waves.
You can read Murray Gunn's regular commentary on fixed income, currencies, the economy and deflation in Global Market Perspective, Interest Rates Pro Service and Currency Pro Service.
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