This week, one of the key points in the global financial market is the upcoming Jackson Hole Global Central Bank Annual Conference, which will start on Thursday. And according to DataTrek Research, there is good news at the moment - historically, the US stock market has 'more rises than falls' in the years before and after this annual economic policy seminar hosted by the Federal Reserve.

Nicholas Colas, co-founder of DataTrek, said in a report sent via email on Monday, '[the US stock market] often rises in the two weeks before and after the Jackson Hole central bank meeting, especially after Fed chairman speeches. We expect the same trend this year.'$S&P 500 Index (.SPX.US)$Please use your DataTrek account to access the feature.

This year's Jackson Hole Global Central Bank Annual Conference will be held from August 22nd to 24th EDT. A complete schedule will be released on August 22nd EDT. According to past schedules, Thursday (August 22nd) is usually the opening dinner of the global central bank annual conference, and a series of formal seminars and roundtables often do not officially begin until Friday. This includes Federal Reserve Chairman Powell, who is confirmed to speak on Friday Beijing time.

According to DataTrek's data, the average return of the S&P 500 index during the two weeks before and after the Jackson Hole annual meeting since 2010 is 0.9%. Colas used the chart below to list the rise and fall of recent years:

As can be seen, except for the sharp decline of the US stock market before and after the annual meeting in 2022, the convening of this central bank conference in the past seven years has been basically good news for the US stock market.

DataTrek also regards 2022 as an "unusual year." In August 2022, Powell delivered a brief speech lasting about nine minutes in Jackson Hole. This was one of the shortest speeches by the chairman of the Federal Reserve in recent years, but it was also one of the most deadly. Powell then put an end to investors' hopes that the Federal Reserve would quickly end its rate-hike campaign, and the S&P 500 index plummeted 3.4% in one day.

Colas said that Powell's speech at Jackson Hole in 2022 "surprised the market" because he indicated that the Federal Reserve would reduce inflation at all costs. Powell also warned at the time that high interest rates could cause "some pain" to households and businesses because tightening monetary policy could slow down economic growth and weaken the labor market.

Now, investors are expecting the Federal Reserve to cut interest rates later this year due to significantly slowed inflation and recent softening of the US job market, intensified by people's concerns about economic prospects.

"The market is very optimistic about the Federal Reserve's interest rate cut later this year," Colas said. "Powell should provide enough assurance on this topic this Friday to see the typical bullish trend triggered by the Jackson Hole annual meeting in the next two weeks."

Based on the latest trend of the US stock market, the S&P 500 index rose by nearly 1% on Monday. This is the eighth consecutive trading day that the benchmark index has risen, setting a record for the longest consecutive rise since November last year. Currently, the S&P 500 index is only about 1.1% below the historical high point created in July. The rapid recovery of investor confidence occurred less than two weeks after the global stock market plummeted due to concerns about the US economic recession.

Colas said that before the highly anticipated Jackson Hole speech, Powell "knows that the market has just experienced turbulent weeks and would want to be cautious in choosing his words."

At the same time, based on the recent corporate earnings conference calls, at least, it seems that companies are not too worried about the short-term economic recession. Colas said that during telephone conversations with investors and analysts about the second-quarter earnings report, only 6% of the S&P 500 index companies mentioned "economic recession," and this percentage is "quite low."

In contrast, during the "epidemic recession" in the first quarter of 2020, 42% of the S&P 500 index companies mentioned "recession" during the earnings conference call, and during the "technical recession" (GDP consecutive negative growth in two quarters) in the first half of 2022, the mention rate of "recession" in the second quarter of that year peaked at 47%. The following figure uses FactSet data.

"Rather than an economic observation, this is a signal that the company's management is still confident in the company's recent profit-making capabilities," Colas said. "If they need to find excuses for poor profits or to lower forward guidance, we will certainly hear more about the imminent economic recession."

Editor/ping