Top 5 Market Trends to Watch in the Upcoming Week

The future direction of U.S. interest rates may become clearer this week as Federal Reserve Chair Jerome Powell speaks at the central bank’s annual retreat in Jackson Hole. Prior to this event, the Democratic National Convention will commence, global PMI data will provide insights into economic conditions, and energy markets are likely to remain volatile due to heightened geopolitical tensions. Here’s an overview of the significant market developments expected this week.

1. Jackson Hole Symposium
   Fed Chair Jerome Powell is set to give the keynote address at the central bank’s annual economic symposium in Jackson Hole, Wyoming, on Friday at 10:00 AM ET. Investors will be closely watching his comments on potential rate cuts in the months to come. Positive recent economic data has fueled optimism in U.S. stocks, alleviating fears of a recession following a growth scare that caused significant selling earlier this month. Most analysts anticipate that the Fed will implement a rate cut at its upcoming September meeting, with discussions centered around whether the reduction will be by a quarter or half percentage point.

2. U.S. Economic Data
   On Wednesday, the Fed is expected to release the minutes from its July meeting. Powell had indicated last month that while inflation progress is being made, rate cuts could be on the table for September. Additionally, the Bureau of Labor Statistics will release a preliminary estimate regarding the benchmark revision of nonfarm payrolls for March 2024 on the same day. A weekly jobless claims report will be published on Thursday, and several Fed officials, including Governor Christopher Waller and Atlanta Fed President Raphael Bostic, will be making public appearances throughout the week.

3. Democratic National Convention
   The U.S. presidential race is intensifying as Democrats aim to rally support for Vice President Kamala Harris during the party’s convention in Chicago, which starts on Monday. Over the four-day event, key Democratic figures are scheduled to speak, reinforcing Harris’s campaign. Following President Joe Biden’s decision not to run, Harris has generated enthusiasm among Democrats and has closed the gap with Republican frontrunner Donald Trump in some polls, even surpassing him in certain betting markets as the November 5 election approaches. Investors will be looking for clarity on her policy plans, notably her commitment to maintaining Federal Reserve independence, which contrasts with Trump’s views.

4. PMI Data Release
   Purchasing Managers’ Index (PMI) reports, which provide timely indicators of economic activity, will be released on Thursday. July’s PMIs indicated a slowdown paired with ongoing inflation, showcasing the challenges faced by central banks. Manufacturing activity in the U.S. has weakened, and disappointing figures from Germany suggested contraction in the Eurozone’s largest economy. Rising input prices in advanced economies also hit an 18-month high. Persistent inflation will influence the scale and speed of future rate cuts, so another weak PMI report could slow the pace of monetary easing more than markets would prefer.

5. Energy Market Volatility
   Global energy markets continue to experience fluctuations influenced by various risk factors, with no immediate relief anticipated. Concerns over escalating conflict in the Middle East have pushed international oil prices above $80 per barrel, fueled by fears of supply disruptions in the region. Concurrently, uncertainty regarding oil demand, particularly from China, is putting a lid on crude prices’ further ascent. European wholesale gas prices have also surged, complicated by the potential disruption of Russian gas supplies through Ukraine. The ongoing conflict near Sudzha, a key transit point for gas into Ukraine, raises alarms about the possibility of halting gas deliveries before a five-year agreement with Gazprom expires.