Powell at Jackson Hole: Could Fed Surprise Markets With Hawkish Speech?

Market Narrative Shift - The market is anticipated to experience a narrative shift, potentially starting at Jackson Hole [1] - The market hasn't fully priced in the hawkish stance expected from central banks [2] Inflation and Economic Data - Powell's concerns from July are materializing, with underlying inflation data showing changes in goods inflation [2] - Household food goods have increased from 2% to 5% [3] - Electronic goods inflation has moved from 0% to 2% [3] - PC inflation is at 3%, with headline inflation at 350% (3.5) [3] - PMI data indicates increasing hiring intentions [3] Monetary Policy and Asset Pricing - The front end of the curve is mispriced, suggesting a potential upward pivot in the short end [4] - Risk assets are incorrectly priced, implying a substantial amount of volatility [4] - The economy's perceived strength poses a challenge for central banks [4] Risk Assessment - Risk assets may face a paradox, with a long-term positive outlook conflicting with short-term challenges [5]