From Poker Face to Pivot : Powell Shows His Hand

As of August 22, 2025

For months, Chair Powell played his cards close, keeping markets guessing with a perfect poker face. Then came Jackson Hole — and suddenly the Fed chair laid his hand on the table. By openly signaling a September cut, Powell surprised traders who expected more ambiguity. This unexpected dovish pivot sent Treasuries rallying, steepened the yield curve, and fueled a sprint in equities back toward record highs. The jury is still out on whether this marks a lasting policy shift or a strategic bluff, but for now, investors are betting on the Fed.

From Poker Face to Pivot : Powell Shows His Hand

The Pivot Premium

Powell’s Jackson Hole speech had two key takeaways for policy:

  1. The labor market is “in a curious kind of balance” and downside risks could materialize quickly in the form of layoffs and rising unemployment.
  2. Tariffs remain uncertain, but the Fed’s base case is that their inflationary impact will be short-lived.

Markets interpreted Powell’s clarity as strong evidence for a September rate cut. Treasury yields fell, the curve steepened, and risk assets—including stocks, gold, and bitcoin—rallied.

Caught Off Guard

The surprise was not just the dovish tone, but Powell’s willingness to tip his hand at all. Leading into Jackson Hole, most investors expected the usual dose of optionality and “wait-and-see.” Instead, they got clarity. Shorts scrambled to cover, institutional investors extended duration. Few things move markets faster than when a central banker tips his hand.

What Comes Next

Even with Powell’s pivot, several risks loom:

  • Inflation Data:Core PCE may remain sticky, testing Powell’s willingness to “look through” temporary distortion.
  • Funding & Supply:Repo market pressures are well-understood, but heavy Treasury issuance—particularly in 2s, 5s, and 7s next week—will test investor demand and liquidity.

Looking Ahead to September

If Powell’s pivot holds, several dynamics could shape the path forward:

  • Yield Curve Dynamics (5s30s):Labor data disappointments and QCEW benchmark revisions may reinforce the case for easier Fed policy and curve steepening.
  • Duration Consideration:September seasonals have historically produced bond weakness, particularly with corporate issuance. September is set to be one of the busiest months for IG supply, which could weigh on duration and indirectly support curve steepening.
  • Risk Asset Watch:Historical trend suggests poor equities performance in September. Current valuations leave little margin for error if data or tariffs surprise.

One open question is whether lower rates might draw flows from money market funds back into risk assets?

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