Federal Reserve Chair Jerome Powell delivered precisely the message markets were hoping for at Jackson Hole, signaling the central bank is prepared to shift policy in September with a likely 25-basis-point rate cut.
For advisors, the remarks confirm what many have anticipated: the Fed is pivoting from tightening to easing, with implications across equities, fixed income, and client portfolio positioning.
Markets responded instantly. The Dow surged nearly 1,000 points at intraday highs, while the S&P 500 and Nasdaq each advanced more than 1%. Treasury yields fell as well, with the 10-year dropping seven basis points to around 4.26%. Taken together, the reaction underscored investor relief that the Fed appears ready to support growth amid mounting evidence of labor-market softening.
“The baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell noted in prepared remarks. He highlighted the labor market as a key concern, pointing to slowing supply and demand for workers. “Downside risks to employment are rising,” he warned, while acknowledging inflation risks remain tilted to the upside.
That balancing act—between lingering inflationary pressures and a weakening job market—is now at the center of Fed policy. For advisors, the message is clear: the central bank is leaning dovish, even if Powell stops short of declaring victory on inflation.
Investor expectations adjusted rapidly. Ahead of Powell’s speech, futures markets priced in roughly a 73% chance of a September cut. By the time his remarks were digested, those odds jumped above 87%. As David Laut, CIO of Abound Financial, put it, “Powell’s dovish Jackson Hole comments suggest the Federal Reserve is ready to cut interest rates in September, which is just what investors were hoping to hear, given the recent slowdown in the labor market.” Laut added that while one more jobs report remains before the September decision, “it’s clear the Fed has enough data under its belt to justify a September cut.”
For wealth managers, the implications are immediate. Lower rates could provide renewed support for equities, especially growth sectors that have been under pressure from higher borrowing costs. Fixed income markets may also benefit, as falling yields offer an opportunity to revisit duration exposure. At the same time, Powell’s caution on inflation means the Fed is unlikely to embark on an aggressive cutting cycle without further confirmation that price stability is secured.
The Fed’s recalibration reinforces the importance of nimbleness in portfolio strategy. Advisors may want to prepare clients for both upside opportunities in risk assets and continued volatility if inflation surprises on the high side or if labor-market weakness accelerates more than expected.
For now, Powell’s Jackson Hole address provides a roadmap: the Fed is prepared to ease policy as risks shift from inflation toward employment. Markets welcomed that clarity with enthusiasm, and advisors can use the signal to reassess client allocations ahead of what is shaping up to be a pivotal September meeting.
