What to Expect from the Fed at Jackson Hole this Week

by | Aug 20, 2019 | Markets

Wall Street’s make or break moment in just days away.

In fact, later this week, Federal Reserve chairman Jerome Powell will deliver his remarks at the Jackson Hole Symposium.  Should he fail to address the stock market’s wild swings, the bond yield inversion, or hint at deeper cuts, some analysts believe the reaction could be “violent.”

“We could see another plunge in rates. We could see further movement down in yields and the yield curve and more volatility and problems in the markets. He should move aggressively,” the Bianco Research president James Bianco told CNBC.

However, even though the market is desperate for another, deeper cut, it may not be warranted.

Part of the reason for that is a stronger U.S. consumer.

After all, despite all of the chaos, consumers continue to spend.

Remember, July 2019 retail sales jumped 0.7% month over month.  Excluding autos, retail sales were up a robust 1.0% in July. That’s quite an encouraging sign.  After all, consumer spending — the primary catalyst of economic growth — remains healthy even as other sectors of the economy, such as business investment, have weakened with the trade war.

“While the incoming global data have been weak, the latest round of U.S. data would not seem to warrant another rate cut so soon; not with core inflation rebounding and the U.S. consumer seemingly hell-bent on single-handedly saving the world economy,” said analysts at Capital Economics, as quoted by Yahoo Finance.

If the Street is not pleased with Powell, markets could become a volatile mess.

In that event, we want to again prep for potential volatility.  Some of the best ways to do just that include the following:

ProShares Ultra VIX Short-Term Futures ETF (UVXY)

As volatility ticks higher with the trade war, ETFs such as the UVXY could run even higher from a current low of $30 a share. . The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. 

VelocityShares Daily 2x VIX Short-Term ETN (TVIX)

The TVIX is another great way to trade elevated volatility.  This ETF  tracks an index of futures contracts on the S&P 500VIX Short-TermFutures Index.

iPath S&P 500 VIX Short-Term Futures (VXX)

As volatility returns to the markets, one of the best ways to profit from volatility is with the VXX ETN, which provides exposure to the S&P 500 VIX Short-Term Futures Index Total Return.  In simple terms, as volatility shoots higher, so does the VXX.