Crypto, Stocks soar higher as Jackson Hole inches closer

• Markets have recovered from their recent tumble ahead of Jerome Powell’s speech on Friday
• The market is spilling over what could be the outcome of September’s Federal Open Market Committee

Markets’ recent drop brought some relief on Wednesday as both stock and crypto traders speculate on what central bankers may take away from this week’s Jackson Hole symposium.

Stocks managed to remain in the green during Wednesday’s trading session, with the S&P 500 ticking up as much as 0.8% and the Nasdaq gaining 1%. After three days of denials, it was a welcome, if minor, respite.

Leading cryptoassets bitcoin and ether are also up 1.2% and 0.8%, respectively, as of 2:00 p.m. ET with Fed Chair Jerome Powell due to be present in Jackson Hole in two days.

“We are at an inflection point for mega-cap trading as hedge funds brace for further bond weakness and a much weaker consumer as the economy slows,” said Edward Moya, senior market analyst at Oanda.

“Today’s recovery is small and small in volume, meaning most traders are waiting until Fed Chair Powell’s symposium speech in Jackson Hole.”

The Economic Policy Symposium, hosted by the Kansas City Federal Reserve, begins Thursday. Powell is scheduled to speak on Friday and markets may be in for a surprise, analysts say.

“Fed funds futures and treasuries say [Powell’s] Jackson Hole speech will be hawkish, with commitments to several more rate hikes and no discernible sign of a “pivot” in the first half of 2023,” said Nicholas Colas, co-founder of DataTrek Research.

“With the VIX at 24, US stocks may not have fully embraced this eventuality yet.”

According to data from CME Group, futures markets have a 58.5% chance of a 75 basis point rate hike at the next policy meeting in September. There is a 41.5% chance of a 50 basis point hike.

Even though markets are fairly evenly split between 50 and 75 basis points, economists don’t expect rising interest rates to stop in September.

Dan Morehead, CEO and chief investment officer at Pantera Capital, expects fed funds rates to hit at least 4% or 5% before the central bank changes strategy.

“You can’t tame runaway inflation with fed funds that are 600 basis points below inflation,” Morehead wrote in a note Wednesday. “The Fed will be forced to tighten much more than markets are currently forecasting.”

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• Casey Wagner

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  Elderly reporter

  Casey Wagner is a New York-based business journalist covering regulation, legislation, digital asset investment firms, market structures, central banks and governments, and CBDCs. Before joining Blockworks, she covered markets for Bloomberg News. She graduated from the University of Virginia with a degree in media studies. Contact Casey via email at [email protected]