A recent analysis by Bespoke Investment Group suggests that the market reaction to Jerome Powell's speeches at the annual Jackson Hole Economic Symposium is typically more muted than what was observed last year. On August 26, 2022, Powell delivered a speech that resulted in a 3.4% decline in the S&P 500, as he disappointed investors by signaling a continuation of the Federal Reserve's interest-rate hiking campaign. Notably, this speech was one of the shortest in recent memory, lasting under 10 minutes.
Bespoke conducted a study on the size of the index's movement during the first two days of the symposium and found that last year, the S&P 500 fell by 2.01% during this period. It is worth mentioning that the symposium typically begins on a Thursday during the last full week in August, with Powell's keynote remarks on Friday around 10 a.m.
In 2020, there was an exception to this pattern when Powell delivered his remarks remotely before the U.S. stock market opened.
Looking at historical data, Bespoke reveals that over the past 20 years, the S&P 500 has experienced an average gain of 0.3% during the symposium. However, since the inaugural Jackson Hole symposium in 1978, the index has typically fallen by 0.1% on average over the two-day event.
Interestingly, Bespoke's analysis also highlights that stock returns tend to be reliably strong in the three months following the symposium, with an average rise of 2.6% since 1978.
This evidence suggests that while market reactions to Powell's speeches at Jackson Hole may vary from year to year, they have typically been less extreme than what was seen in 2022. Investors can take comfort in this historical context as they await Powell's upcoming speech.
The Monday Dip: Jackson Hole Event Impact on S&P 500
The Jackson Hole event, despite its significance in the financial world, has one consistent pattern of weakness — the Monday following the event. Since 1978, the S&P 500 has shown an average drop of 0.1% during these trading sessions. However, when considering only the years where the S&P 500 has witnessed a rise of 10% year to date before the event, this average drop swells to 0.4%.
As of Wednesday's close, the S&P 500 has marked an impressive 15.5% year-to-date increase. Yet, since the beginning of August, stocks have retraced some of these gains, resulting in a 3.3% decline month to date.
Looking back at the history of the Jackson Hole symposium before 2022, one major pullback for the S&P 500 occurred in 2019. However, this dip was unrelated to Powell's policy pronouncements. Instead, it occurred due to then-President Donald Trump's threats of escalating a trade war with China.
Interestingly, after Powell's speech concluded during that particular year, Trump sent out a tweet ordering American companies to seek alternatives to China. The S&P 500 swiftly erased its early gains and plummeted.
Despite this historical context, Wednesday saw U.S. stocks recovering as the S&P 500 notched its first daily gain of 1% or more in the third quarter. This upswing broke a streak of 36 trading days without such gains. Closing at 4,436.01 points, the index climbed 48.46 points or 1.1%. Additionally, the Nasdaq Composite gained 215.16 points or 1.6%, closing at 13,721.03, and the Dow Jones Industrial Average rose by 184.15 points or 0.5%, reaching 34,472.98.
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