Simply put, as Citi noted, unless Fed head Janet Yellen goes full-dovish, risk assets face tremendous downside potential. As ConvergEx’s Nick Colas notes, Yellen receives a “B” grade from financial professionals, fewer than half (49%) of those surveyed approve of the job the Federal Reserve is doing. A clear majority (59%) of respondents describe the Fed as being “behind the curve” with respect to interest rates. Despite better-than-expected data whereever one looks in the US (apart from wages and housing), any hint of seni-dovish, or contingent dovish… or heaven forbid hawkish comments and the massive consensus trade that the Yellen Put has an ever-increasing strike price will fall rapidly by the wayside… though Draghi could come in later and save the day. With S&P so close to 2000, we suspect any hint of word ‘slack’ and algos will run stops and USDJPY will break 104.
Pre-Yellen:Â S&P Futs 1986, 10Y 2.407%, JPY 103.77, Gold $1278, Oil $93.35
- *YELLEN: LABOR MARKET HASN’T FULLY RECOVERED EVEN AMID JOB GAINS
- *YELLEN SAYS THERE’S `NO SIMPLE RECIPE’ FOR APPROPRIATE POLICY
- *YELLEN: FOMC SHIFTING TO QUESTIONS ON LEVEL OF JOB-MARKET SLACK
- *YELLEN SAYS GAUGING LABOR-MKT SLACK NEEDS TO BE `MORE NUANCED’
- *YELLEN REITERATES ASSET BUYING TO BE COMPLETED IN OCTOBER
- *YELLEN SAYS ASSESSMENT OF SLACK DEPENDS ON RANGE OF VARIABLES
- *YELLEN SAYS FASTER PROGRESS ON GOALS MAY BRING RATE RISE SOONER
- *YELLEN SAYS SLOWER PROGRESS ON GOALS MAY DELAY RATE INCREASE
- *YELLEN COMMENTS AT FED CONFERENCE IN JACKSON HOLE, WYOMING
- *YELLEN SAYS FOMC SEES SIGNIFICANT UNDER-USE OF LABOR RESOURCES
We are unsure if there is a live feed (due to start at 10amET)Â
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Full Statement (link):
Yellen Speech Jackson Hole 2014
BACKGROUND…
As Deutsche’s Jim Reid notes,
Chair to provide us with an updated assessment on the infamous ‘Yellen dashboard’ in evaluating the ongoing labour market slack and how they have yet to normalise relative to 2002-2007 levels.Some of these alternative measures she monitors include duration of unemployment, quit rate in JOLTS data, labour force participation etc. Any sound bite that touches on the debate of cyclical versus structural drivers of labour force participation will also be closely followed. Unlike some of the previous Jackson Hole symposiums, this is likely not one that will serve as a precursor of any monetary policy changes but the tone of Yellen’s speech may still have a market impact and set the mood for busier times ahead in September. Given markets are seemingly expecting nothing but another dovish display from Yellen the risk is perhaps skewed to the other side.
