Powell welcomes the curtain speech at Jackson Hole, with interest rate cut expectations and retail earnings reports shaping the trend of U.S. stocks

The Zhitong Finance APP noted that in the coming week, the investment community's attention will focus on the northwest of Wyoming, USA—Federal Reserve Chairman Jerome Powell will deliver his most important policy speech during his tenure at the annual economic symposium in Jackson Hole on Friday. This annual meeting, hosted by the Federal Reserve Bank of Kansas City at the Jackson Lake Lodge in Grand Teton National Park, has historically been a key stage for the Federal Reserve Chairman to signal policy shifts.

On the eve of Powell's (likely his last as Federal Reserve Chairman) speech, the market's expectation probability for at least a 25 basis point rate cut by the Fed next month has reached 85%. Clues regarding the speed and magnitude of the Fed's upcoming rate-cutting cycle will be the most market-influential events this week.

In terms of corporate earnings, the performances of Walmart (WMT.US), Target (TGT.US), and Home Depot (HD.US) will dominate the retail sector focus, marking a slowdown in the earnings season. The economic data flow will also be light this week, with the initial jobless claims and the services activity index to be released on Thursday becoming the main highlights.

Investors may need to pay special attention to the minutes of the Federal Reserve's July 30-31 meeting to be released on Wednesday, which may detail the dissenting opinions of Governors Waller and Bowman against the decision to maintain interest rates in the 4.25%-4.50% range.

In 2018, newly appointed Federal Reserve Chairman Powell first systematically articulated his thoughts on the core variables of central bank decision-making at the Jackson Hole symposium, interpreting the technical dimensions of monetary policy from a non-economist's perspective. Over the past seven years, this policy practitioner has dealt with the misjudgment of rate hikes in 2018, the COVID-19 pandemic, the inflation shock of 2022, and the ongoing rate-cutting cycle that has yet to be completed for over a year.

"The time for policy adjustment has come," Powell declared last August. However, after three rate cuts in September, November, and December of last year, the Federal Reserve has remained inactive. With increasing dissent within the Federal Open Market Committee and the White House's tough stance over the past few months, Powell's position has returned to where it was a year ago.

In his 2018 speech, he detailed former Chairman Greenspan's decision to remain inactive in the mid-1990s, praising the foresight of this "wait-and-see" strategy—this preference for waiting has become a distinctive note of Powell's tenure. "The necessity of risk management methods pioneered in the new economic era is clearer than ever," Powell stated at the time (except for the emergency actions in March 2020), accurately predicting his policy framework.

As Powell approaches the end of his tenure as Federal Reserve Chairman, the President has bestowed upon him a new nickname: "Late-arriving Powell." "The diversity of views within the FOMC is a great strength of our system," Powell said, "despite the differences, we have a institutional tradition of building policy consensus."

A year later, the new Federal Reserve Chairman will take the stage at Jackson Hole. By then, interest rates may have declined, but the new chairman's interpretation of the core principles of the central bank will determine the future direction of the Federal Reserve.

Retail Narrative

Following a 0.9% increase in June, U.S. retail sales rose 0.5% month-on-month in July. Economic data shows that consumer spending has stabilized after the tariff shocks this spring. Walmart's earnings report released on Thursday will provide the most comprehensive picture of consumer spending, as the company stated in May that growth was seen across all income levels Analysts expect a 4% increase in same-store sales in the U.S. for the second quarter (compared to 4.5% in the first quarter), with its stock price rising over 10% this year, outperforming the S&P 500 by about 1 percentage point.

Target, which has fallen 20%, faces management scrutiny, while Home Depot navigates a housing market viewed by some critics as in decline. Although individual stock stories can always stir the market (like Nvidia's earnings report on August 27), last week's market performance shows that investors are looking beyond short-term noise for more solid foundations.

"The bull market continues, with funds even rotating from this year's winners into lagging sectors like healthcare and residential construction," noted Bespoke Investment Group.

When momentum stocks stagnate, if no other sectors step in, the market will suffer greatly—but this week, investors chose to rotate across sectors rather than retreat.

Like many aspects of modern life, the stock market narrative is often simplified by memes like "Sell America" or TACO. However, the S&P 500 reached two new highs this week, and the calm demeanor of investors actually confirms the healthy underpinning of the rally. Despite being driven by tech giants and AI trading, this week's sector rotation is illustrating the core theme of society in 2025: everyone has their moment to shine