Fed Policy After Jackson Hole
Jackson Hole gave no firm signal, but the tone leaned hawkish. The most-noted line was that the Fed is "focused more on discipline than on decision" - a fair point that gave little detail on what that discipline means. All else equal, a rate hike looks likely. A Fed meeting comes in a couple of weeks.
For stocks, the level of the 10-year yield matters less than the speed of hikes. Past cycles show a wide gap in market results between fast cycles, where the Fed acts at every meeting, and slower, steadier ones. That pace will shape how equities behave.
Inflation Feeders: Energy and Tariffs
Inflation and energy are tied together. Two supply-side drivers stand out: the war in Iran, which lifts energy prices, and a fresh escalation of the trade war through tariffs. Both push prices up. This pushes the Fed toward its inflation mandate. The 2% target still holds, and inflation has run above it for years, which feeds the bias to tighten. The market now prices 62% odds of a hike.
Rate hikes have limits. They cannot fix the energy supply problem, and they cannot fix the damage from ramping tariffs and restarting a trade war.
The Weak Yen
About a month ago there was a joint intervention to support the yen. Markets stay unconvinced that yen weakness will end. The Bank of Japan may hike in September, yet the yen is still weak. Currency intervention does not work without a change in fundamentals. Yield differences and fiscal policy both point to continued yen weakness. Belief that the Fed could hike sooner adds pressure. The intervention slowed the fall but did not stop it. Speculators covered some short positions on the intervention but stay net short, per the CFTC.
China's Stock Ceiling
China has made real progress in technology, but it is not showing up in earnings. The big four banks reported higher credit impairment losses. Tech firms are raising AI capital spending. Tension may spill into Xi's US visit in a couple of weeks, where China says the US must prove its AI companies face the same safety rules as Chinese ones.
Overall earnings keep falling. Earnings estimates for the MSCI China index ticked up earlier this month, then slipped back - the 18th month in a row of decline. Earnings look like they are trying to stabilize, but it is too early to say. A better earnings outlook would improve the outlook for Chinese stocks.
G20 Meeting
A G20 meeting is set for this week with major players attending. Whether anything meaningful reaches the public is unclear. The timing is tricky. Bessent has said the focus will be global growth, but much of what is happening inside the US also touches the rest of the world - the trade war, tariffs, and the war in Iran all cut against a growth focus. Pressure is on Bessent to give clarity on these competing forces he sits at the center of.
Key Catalysts This Week
Earnings season is winding down, but big tech names still report, and a jobs report lands at the end of the week. The standout is Broadcom (AVGO), the next major name in what could be called the "neural 9" - the Magnificent 7 plus Micron (MU) and Broadcom (AVGO). It matters much like Nvidia's (NVDA) report last week, which came in to the upside.
Earnings growth is strong but very concentrated: Nvidia (NVDA) and Micron (MU) together make up about a third of all expected 2026 earnings growth for the S&P 500. These bellwethers set the forecast for the rest of the year and into next year, both for the index and for the tech sector. The jobs report could move markets if it surprises hard in either direction, but from a pure market view, the Broadcom (AVGO) release is the most important.
