Michael Reinking:

Hello, I'm Michael Reinking, senior market strategist at the New York Stock Exchange, and this is Market Storylines. Every week, we are here to keep you up to date on the key trends and events driving global markets. We left you last week ahead of Fed Chair Powell's address at the Jackson Hole Economic Symposium, which I'll briefly touch on. This triggered a big rally across risk assets on Friday, and this week, we have largely been digesting those gains. We are recording on Thursday afternoon, so let's dive into this week's Market Storylines.

Now with, the Teton Mountain Range in the background, Fed Chair Powell delivered what was viewed as a dovish speech. From our perspective, his speech was just the next step in setting the table for a rate cut in September, not really a pivot in his stance. He led out acknowledging the recent week labor market data, but describe the labor market as in a curious kind of balance with a decline in demand for workers and in supply, given the change in immigration policy.

Now, the key point is that the situation is causing the balance of risks to shift. Now, when talking about inflation, he pointed out that the impact of tariffs are starting to be seen, and he said he expects to see price pressures continue in the near term, but once again laid out the base case that the effects would be a short-lived one-time shift in price levels. Now, the door is now wide open for a September cut, and given his commentary that the gating item will be the labor market data released next week. Now, also, keep in mind the revisions for the previous year are also set to be released on September 9th and will also likely be a negative with Goldman Sachs saying it will be down between 550 to 950,000 jobs, which will add to the momentum for a cut. Now, part of the sharp response on Friday was that in anticipation of the speech, there was a building narrative that Fed Chair Powell could deliver a defiant message given the constant barrage of criticism from the White House.

Now, that clearly didn't come to fruition, and his messaging sounded much more aligned with that of the recent dissenters. Now, he did highlight the importance of independence, which will largely be the topic of the rest of this week's episode. So let's start by defining independence. The Webster definition is a state of not being dependent, complete exemption from control or the power of others. Now, before we talk about independence in the context of the Federal Reserve, how can we not mention the biggest news story of the week, the engagement or loss of independence for the power couple of Taylor Swift and Travis Kelce? For the record, I lost my independence 18 years ago this coming weekend, and I know I'm one of the luckiest men alive. So with the high-profile engagement, there are big questions. Will Travis take her last name? Will he sign a prenup, and will his brother Jason wear a T-shirt tuxedo to the wedding, and will they tap her catalog for the wedding song? We'll keep an eye out for odds to be posted on Polymarket.

So back to Fed independence. At the end of last week, the administration began to air allegations of mortgage fraud against Fed Governor Lisa Cook, with the president saying he would fire her if she did not resign, and he has followed through on that threat this week. She's not going without a fight and has filed the lawsuit questioning the president's authority on the matter. The Federal Reserve for its part has said it will abide by any court decision on the matter with the first hearing set for tomorrow. Now, the Fed's Board of Governors is made up of seven members. Now, if Cook is removed, this could shift the balance of power on the board who are tasked with reappointing regional Fed presidents, a process that takes place this coming March. Now, the initial firing headlines caused some modest volatility in equity in rates markets, but that did not have a lasting effect.

Now, sticking with independence, the line between corporate independence and the government is also starting to blur. This week, the US government officially took an equity stake in semiconductor company Intel, which comes on the heels of a stake it took in MP Materials earlier this week in an attempt to build an independent rare earth supply. Now, administration officials have suggested that these may not be the last either with Commerce Secretary Lutnick saying this could be applied to the defense industry as well.

Now, this is the perfect segue into this week's big catalyst, earnings from NVIDIA, the world's largest company. Now, those results were once again quite impressive with sales growing over 50% on a year-over-year basis on a $30 billion base despite no sales of the H20 chip to China. Now, production of the Blackwell chip has ramped up, and CEO Jensen Huang continued to highlight the strong data center demand, growing AI adoption, and the coming evolution of physical AI like robotics, that despite the numbers coming in ahead of expectations, the stock reaction has been muted given the high bar, but triggered a bit of a relief rally in the rest of the AI complex today.

Now, for the week, most major US indices are hovering around unchanged, but the S&P 500 is making a new all-time high, testing the 6,500 level this afternoon. Now, quickly looking ahead, Friday is month end and barring a sharp sell-off, we're looking to end this seasonally challenging time period with very solid gains. The S&P 500 is up 2.5% in August while the Russell 2000 is up over 7%. Now, the real challenge comes in September, the only month with a negative average return profile going back to the 1970s. Now, this week wraps up with personal income and spending and PCE, the Fed's preferred gauge of inflation. Though with CPI and PPI already in the books, I wouldn't expect too much of a surprise.

Now, coming out of a college football filled long holiday weekend, the focus next week will once again be on economic data and the Federal Reserve with the August ISM surveys and the labor market data, while Steve Miran's confirmation hearings also begin. Now, that's going to do it for this week. Thanks for spending some time with us. If you like today's episode, please tell a friend or leave a comment wherever you listen to your podcasts. Enjoy the long weekend and good luck to all the kids out there starting a new school year. Thanks for joining me. I'm Michael Reinking. I'll talk to you again next week.

Speaker 2:

That's our conversation for this week. Remember to rate, review, and subscribe wherever you listen, and follow us on X at ICEHousePodcast. From the New York Stock Exchange, we'll talk to you again next week inside the ICE House. Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties, expressed or implied, as to the accuracy or completeness of the information, and do not sponsor, approve, or endorse any of the content herein. All of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security, or a recommendation of any security or trading practice. Some portions of the preceding conversation may have been edited for the purpose of length or clarity.