Evercore’s Emanuel Warns Powell May Disappoint Markets at Jackson Hole
U.S. stocks entered the week hovering just below record highs, buoyed by strong corporate earnings and optimism that the Federal Reserve will soon begin cutting interest rates. Investors now look to Fed Chair Jerome Powell’s keynote address at the Jackson Hole symposium on Friday for dovish signals.
But Julian Emanuel, chief equity and quantitative strategist at Evercore ISI, cautions that Powell may not deliver what markets want to hear. In a Sunday note shared with MarketWatch, Emanuel said the backdrop complicates Powell’s message, as both sides of the Fed’s dual mandate—price stability and employment—are sending mixed signals.
Recent inflation data reignited concerns about its persistence, while jobs figures point to cooling momentum. Initial jobless claims remain low, but the three-month average payroll growth is the weakest since 2010, when unemployment was at 9%.
Meanwhile, equities keep climbing, leaving the S&P 500’s trailing P/E multiple at 25.5—one of the highest since the dot-com era—just as seasonally weaker months loom. Emanuel recalls Powell’s 2022 Jackson Hole remarks, when a stern inflation-fighting stance rattled markets.
This year, he warns investors could again be disappointed if Powell signals only a 25-basis-point rate cut at the Fed’s September 17 meeting, rules out 50 basis points, and stresses that future cuts remain data dependent. According to Emanuel, such a stance could spark a near-term 7% to 15% correction into October, even within the longer-term AI-driven bull market.
To navigate this setup, Emanuel recommends downside protection via October put options on the Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100. He also suggests rotating into lower-valuation sectors like healthcare while trimming exposure to expensive names such as Palantir (PLTR), Cleveland-Cliffs (CLF), and Coinbase (COIN).
