Federal Reserve Chairman Ben Bernanke’s widely anticipated speech in Jackson Hole, WY this morning yielded no susbtantive new information for investors. Last year at this time, Bernanke used the Jackson Hole speech to lay the groundwork for a $600 billion money-printing operation (dubbed QE2), sparking a rally in equity and commodity markets. This time, however, significant opposition within the Federal Reserve and questions over the effectiveness of QE2 have prevented another round of money printing, at least for the time being. Bernanke sought to reassure markets that U.S. growth will strengthen over the long term, and announced that the Fed’s next meeting in September will be extended to two days, presumably to allow more time to discuss additional stimulus measures.
For now, the markets can focus on upcoming economic data rather than speculating about the Fed’s next move. To that end, next Friday brings the August employment report. The Bloomberg consensus expects a positive 75,000 change in nonfarm payrolls, with the unemployment rate remaining at 9.1%. Given the slow growth of the U.S. economy and recent uptick in weekly unemployment claims, the risk is to the downside for the employment report.
The good news is that the equity markets broke a string of four straight weekly losses to gain about 5% this week, while gold broke a string of seven weekly gains.
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the Funds or any stock in particular, nor should it be construed as a recommendation to purchase or sell a security, including futures contracts.
There are risks involved with investing, including loss of principal. Current and future portfolio holdings are subject to risks as well. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Narrowly focused investments and smaller companies typically exhibit higher volatility. Bonds and bond funds will decrease in value as interest rates rise. High-yield bonds involve greater risks of default or downgrade and are more volatile than investment-grade securities, due to the speculative nature of their investments. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.
Diversification may not protect against market risk. There is no assurance the objectives discussed will be met. Past performance does not guarantee future results Index returns are for illustrative purposes only and do not represent actual portfolio performance. Index returns do not reflect any management fees, transaction costs or expenses. One cannot invest directly in an index.