Daniel Vaughan: Last week the annual meeting, formally known as the Jackson Hole Economic Symposium, took place. The meeting has been going for the last 30 or so and every year in late August the Kansas City Fed becomes home to central bankers, economists, policymakers and academics from all over the world.
Amongst others in attendance this year were Fed Chief Janet Yellen and the Governor of the Bank of Japan, Haruhiko Kuroda. Despite the international attendee list most market watchers were much more focused on the U.S. domestic it seems and just trying to garner from Yellen's speech some idea of when and if there will be another interest rate rise in the U.S. this year.
The media's reporting gave a sense that an interest rate hike is near and the debate seem to be around whether it would be September or December. But financial markets were less convinced, futures trading suggesting a likely outcome being a 0.25% rate increase in December but only pricing in less than 50% probability of this taking place.
U.S. equity markets, the same. They finished down on the day and have remained around those levels. So, perhaps investors are factoring a greater likelihood of a rise. The utilities sector took the biggest hit on that day and has fallen further subsequently.
But the sector had already begun declining from July. It's been on a very strong run from the start of the year, up around 18% to midyear, making it the best performing sector in the S&P 500. It had been driven higher by the search for yield, but perhaps valuations have become too stretched already.
U.S. jobs data released today, just an hour or so ago, were meant to strengthen the case for the rate rise. However, the non-pharm payrolls came in at about 151,000 jobs last month, well below the consensus expectation of 180,000 and close to our Economist Bob Johnson's estimate. So, perhaps the media has been a little bit too optimistic on the prospects for a rate rise this year.
