JACKSON HOLE Friday The second catalyst investors should watch this week is Fed Chair Jerome Powell's speech at Jackson Hole on Friday, which comes amid a renewed surge in interest rates. The 10-Year US Treasury rate is currently above 4.30%, its highest level in more than 15 years, while the average 30-year fixed mortgage rate has solidly moved above 7%.
"We think the Fed is likely somewhat bothered by the rise in 10-year yields. This represents a meaningful tightening in financial conditions and threatens to push mortgage rates higher," Lee said.
The surge in interest rates comes at a time when inflation has made meaningful progress in moving lower, and it also triggers some painful memories back to February and March, when a surge in interest rates represented a breaking point for regional banks, with Silicon Valley Bank ultimately imploding.
"This 50 basis point surge in yields could trigger a financial problem somewhere," Lee said of the recent jump in interest rates, as it did earlier this year with the regional banking crisis.
Altogether, this could lead Powell to make some dovish comments during his Jackson Hole speech, along the lines of acknowledging that progress has been made on the inflation front and that perhaps the Fed is done, or almost done with its interest rate hikes.