MW Without this signal at from Powell at Jackson Hole, stocks could slide 15%, says this strategist

By Jamie Chisholm

Fed Chair Powell's speech may disappoint investors, according to Evercore's Emanuel

Equities may drop like autumn leaves

Stocks start the week just shy of record highs, underpinned by a well-received corporate earnings season and hopes the Federal Reserve will soon start reducing official borrowing costs again.

Investors are therefore keen that Friday's keynote address by Fed Chair Jerome Powell at the Jackson Hole symposium will be suitably dovish.

But there's a danger it won't be, says Julian Emanuel, chief equity and quantitative strategist at Evercore ISI, and that may spell danger for stocks.

In a note published Sunday and shared with MarketWatch, he says that the stakes for Powell at Jackson Hole are high with both sides of the Fed's dual mandate muddled.

Last week's consumer and producer price data "revived [the] stickiness of inflation debate, he says. While jobless claims were subdued, a nonfarm payrolls report at the start of August showed the 3-month average at its weakest since 2010 when unemployment was 9%, he adds.

Awkward. And the problem is this backdrop is occurring while stocks have pushed ever higher, leaving the S&P 500's SPX trailing earnings per share multiple at 25.5, Emanuel notes. That's "among the highest since Y2K [the year 2000], and into challenging fall seasonality."

Some market participants will have in their minds Powell's Jackson Hole comments in 2022, when the Fed Chair delivered what Emanuel calls his stern inflation-is-job #1-and-we-are-just-going-to-keep-hiking speech. Stocks did not react well to that.

This time, the market may be disappointed by Powell indirectly signaling a 25 basis-point rate cut on September 17, but stressing that 50 basis points is not an option and that any possible October or December cuts will remain data dependent, Emanuel reckons.

"For a market that was eager to embrace '50 in Sept', a balanced view could catalyze a near term -7% to -15% pullback into October, within the context of the structural AI-driven bull market," he says.

This fall fall, as Emanuel calls it, may track typically soft seasonal characteristics for equities.

Plays to make under this scenario include buying October downside put options on the Invesco QQQ Trust Series I QQQ, which replicates the Nasdaq 100, says Emanuel. Puts give the buyer the right to purchase an asset at a certain price by a certain date, and are usually made if the trader thinks the underlying asset will fall in price.

Also, buy attractive valuation sectors, such as healthcare, and help pay for that by selling high valuation stocks, such as Palantir (PLTR), Cleveland-Cliffs $(CLF)$ and Coinbase (COIN).

Markets

U.S. stock-index futures (ES00) (YM00) (NQ00) are lower as benchmark Treasury yields BX:TMUBMUSD10Y fall. The dollar index DXY is higher, while oil prices (CL.1) rise and gold futures (GC00) are trading around $3,394 an ounce.

   Key asset performance                                                Last       5d      1m      YTD      1y 
   S&P 500                                                              6449.8     0.94%   2.43%   9.66%    16.12% 
   Nasdaq Composite                                                     21,622.98  0.81%   3.48%   11.97%   22.64% 
   10-year Treasury                                                     4.297      0.80    -8.70   -27.90   42.10 
   Gold                                                                 3394       0.01%   -0.48%  28.59%   33.49% 
   Oil                                                                  63.24      -1.19%  -3.86%  -12.01%  -14.32% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

U.S. economic data due on Monday include the home builder confidence index at 10:00 a.m. Eastern.

European leaders, including Ukraine's Volodymyr Zelenskyy, will head to the White House on Monday to discuss Russia's invasion of Ukraine.

Investors are looking to take members-club company Soho House $(SHCO)$ private, according to the Wall Street Journal.

Novo Nordisk shares (NVO) are climbing after the Food and Drug Administration approved the popular weight-loss drug Wegovy to treat a form of liver disease.

Palo Alto Networks (PANW) will release earnings after Monday's closing bell.

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The chart

Source: Jim Bianco on X.

The Trump administration is agitating for the Federal Reserve to cut its fed funds rate significantly, mainly because of a desire for benchmark borrowing costs to fall. But as this chart from Jim Bianco of Bianco Research shows, if a country's budget deficits are growing and inflation is a concern, then easier policy can cause higher long-term rates. "The last 125 basis points of rate cuts by the Bank of England have seen the 10-year Gilt rise 87bps," says Bianco, who adds that "cutting rates is NOT lower long rates!"

Top tickers

Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   UNH     UnitedHealth 
   PLTR    Palantir Technologies 
   NVO     Novo Nordisk 
   OPEN    Opendoor Technologies 
   GME     GameStop 
   AAPL    Apple 
   AMD     Advanced Micro Devices 
   TLRY    Tilray Brands 

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-Jamie Chisholm

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August 18, 2025 06:53 ET (10:53 GMT)

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