Markets were mixed as tech lagged while small caps and the Dow led. Powell’s Jackson Hole speech stressed jobs and AI’s impact, with rate cut odds still high.
Key Takeaways
Tech weakness weighed, but small caps and Dow outperformed strongly
Powell’s Jackson Hole speech spotlighted jobs, AI impacts hiring
Rate cut odds remain high, markets await key data
It was a mixed week for stocks with tech shares weighing heavily on the market. The Nasdaq Composite dropped 0.6%. The S&P 500 gained 0.3%. Meantime the Dow Jones Industrial Average added 1.5% and small cap stocks turned in the best performance, adding 3.3%.
Last week’s highlight event was Federal Reserve Chairman Jerome’s Powell’s speech from Jackson Hole on Friday. I found his remarks very interesting. While addressing what specifics the Fed will be focusing on with respect to interest rates, Powell emphasized the job market. We’ve seen a weakening job market of late, and I think it’s fair to ask what the source of the weakness is. I believe there could be two answers, and they aren’t mutually exclusive. One answer is the trade policy changes we’ve seen this year have made forecasting and as an extension, hiring needs, challenging. At the same time, we could be seeing something similar to what we saw in the late 90s during the infancy of commercial use of the internet.
At that point in time, companies slowed down hiring, though they didn’t necessarily let people go. No one really understood what the internet might mean for commerce and while they sorted through that, hiring slowed. We’re seeing something similar at the moment and perhaps it’s being driven by Artificial Intelligence (AI). Through July, the unemployment number hasn’t ticked up by much; however, we’re seeing less new jobs created and a lot of entry level jobs eliminated. Recent college grads are facing an inherently more difficult market.
