Some are reporting a sense of deja vu, equating the period ahead of Jackson Hole in 2010 with now in 2011. Maybe its just me, but I see more differences than similarities. The equity markets fall into August 2010 was a longer affair, not like the sharp falls we saw and then the 3 weeks since of sideways-to-up-a-bit (yes, 3 weeks … its passed in a bit of a blur for me … at least I’m not a put option holder bleeding through the time decay). If memory serves I recall the fear around this time in 2010 was more intense. The fear at the moment, while easy to rekindle on any Eurozone headline bombs, is tempered by the hope (yes, that dirty word) of something out of Jackson Hole. I also remember the reaction to Bernanke at Jackson Hole in 2010 – the surprise that there was to be another QE round and the sustained rally in equity markets it produced. Its nigh on impossible to envision such a rerun this time. It just ain’t gonna happen (the surprise or the rapid rally).
I think those hoping for something substantive out of Jackson Hole are now in the naive minority, I can’t believe that there are those still thinking a rabbit is to be pulled out the hat. I could be wrong. So I’m thinking that the sell-off during cash hours yesterday (Thurs) from the morning highs … well maybe that was the ‘sell the fact’. I was looking for a ‘sell the fact’ move & maybe that was it. The afternoon before the speech … makes sense from a liquidity-seeking point of view.
OK, now this is not to say that the market is therefore going to go up. I don’t think it is, at least not a sustainable up move (it can until the next nasty headline out of Europe). But, I think once the contents of Bernanke’s Jackson Hole speech are digested, then focus is going to turn rapidly back to the economy and European woes. (BTW, watch out for the GDP numbers 90 minutes before the scheduled speech – any worsening here will see a sell-off). In short – back to the day-to-day reality, which is responding to economic releases as they paint the ongoing picture of what’s going on in the US and globally (which is not looking great, just more of the very-low-growth-bordering-on-recession picture) and the chainsaw-juggling in Europe as the authorities there continue to try to buy time.
Reminder of Bernanke’s SCHEDULE:
Ben Bernanke will give his speech at the Jackson Hole Symposium at 10am (ET) on August 26, 2011.