Whatever is the future path of monetary policy could decide what happens next for a stock market that’s struggling to broaden out and extend leadership beyond the companies that have worked so far in 2025. Central bank officials from around the globe will convene next week in Jackson Hole, Wyoming for the Federal Reserve’s annual economic symposium , an event that will be closely watched for any clues from Fed Chair Jerome Powell as to what will happen at its remaining policy meetings this year, in September, October and December. This week, the prospect of more interest rate cuts — potentially even a supersized half point next month — drove up parts of the market that have been left behind. The Russell 2000 rallied more than 3%, headed for its best week since May, when some technical analysts had anticipated a small cap summer. The equal weight S & P 500 outperformed. Health care, this year’s laggard, was the best-performing S & P 500 sector , climbing almost 5% this week. So long as rate cuts are coming — without a a slowing economy or rise in inflation — the reversal in fortunes for the market’s former laggards may continue. That would be a boon for an overvalued market that has again depended on a handful of its biggest winners for this year’s gains. “Will small-, mid-caps outperform large caps? That’s the question,” said Brian Leonard, portfolio manager at Keeley Gabelli Funds. “We think there’s a possibility they do.” Potentially, Fed Chair Powell could throw cold water on the market if he takes a more hawkish stance than expected at Jackson Hole next week, especially as macroeconomic concerns persist. But many market observers are certain that the typically staid Fed chief will do his best not to show his cards. Leonard, for one, said he’s cautiously optimistic on the broader equity market. On Friday, the major averages were each headed for a winning week, with the Dow Jones Industrial Average higher by nearly 2% and the S & P 500 and Nasdaq Composite each up roughly 1%. Future of the Fed The Fed will come under the spotlight next week at a critical time. The Trump administration is actively searching for the next Fed chief to succeed Powell when his term ends next May, a race that is raising questions about Fed independence. This week, it was revealed there are 11 potential candidates , including Jefferies Chief Market Strategist David Zervos, former Fed Governor Larry Lindsey and BlackRock chief investment officer for global fixed income Rick Rieder. Many of the candidates, including Zervos and Rieder, have publicly called for aggressive interest rate cuts. It’s a likely prerequisite for President Donald Trump, whose rising hostility toward Powell has hinged on the Fed having yet to lower interest rates this year. Trump has unleashed a barrage of barbs, calling Powell — who Trump nominated as Fed chair in late 2017 — “TOO LATE,” and “stupid,” among other epithets. Yet, economists expect that Powell is more likely to use his time on the podium in Wyoming to address how monetary policy could change in the years ahead. He’s scheduled to speak at 10 a.m. ET next Friday, Aug. 22. This week, Sarah House, senior economist at Wells Fargo Economics, wrote that the Fed will likely outline an approach that abandons a policy of allowing inflation to sometimes run a little above 2% to make up for periods when inflation was lower than 2%, and instead target “a simple 2% inflation target, where it does not try to make up for past misses.” Other changes could include tying its maximum employment objective more directly to its inflation goal, House said. “We’ll find out what Mr. Powell says next week at the Jackson Hole symposium — if there is a likelihood of a cut or not, and we’ll see what his commentary is,” Leonard, the portfolio manager, said. Fed minutes next week could also illustrate the current dynamic at the central bank, given that the last meeting had two policymakers dissenting from the group and voting in favor of lower interest rates. It was the most meaningful dissent since late 1993. Caution and optimism The stock market continues to perform extraordinarily well this year, defiant of macroeconomic and geopolitical concerns. Yet, with August and September both months that show seasonally weaker prices, and investors continuing to scan for signs of the tariff impact on business, Wall Street is bracing for continued, near-term choppiness. Next week Target and Walmart report earnings results. The big box retailers are likely to provide crucial commentary on the state of consumer spending during the critical back-to-school season. Week ahead calendar All times ET. *2025 Federal Reserve Bank of Kansas City’s Economic Policy Symposium in Jackson Hole, Wyoming on “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy” takes place Aug. 21-23 Monday, Aug. 18 10:00 a.m. NAHB Housing Market Index (August) Earnings: Palo Alto Networks Tuesday, Aug. 19 8:30 a.m. Building Permits preliminary (July) 8:30 a.m. Housing Starts (July) Earnings: Keysight Technologies , Jack Henry & Associates , Home Depot Wednesday, Aug. 20 2:00 p.m. FOMC Minutes Earnings: TJX , Analog Devices , Estee Lauder Companies , Target , Lowe’s Companies Thursday, Aug. 21 8:30 a.m. Continuing Jobless Claims (08/09) 8:30 a.m. Initial Claims (08/16) 8:30 a.m. Philadelphia Fed Index (August) 9:45 a.m. PMI Composite preliminary (August) 9:45 a.m. S & P PMI Manufacturing preliminary (August) 9:45 a.m. S & P PMI Services preliminary (August) 10:00 a.m. Existing Home Sales (July) 10:00 a.m. Leading Indicators (July) Earnings: Workday , Ross Stores , Intuit , Walmart Friday, Aug. 22
