Homebuilders and Banks Await Pivotal Moment at Jackson Hole Symposium

On August 22, 2025, investors will be closely watching Federal Reserve Chair Jerome Powell's speech at the Jackson Hole symposium, seeking confirmation of a September interest rate cut. This year's gathering comes after a week of mixed signals on the state of the U.S. economy, with consumer and wholesale price data complicating the path for rate cuts.

The central bank has held steady since cutting rates by 50 basis points in September 2024 and 25 points in both November and December of that year. Growing bets of a cut next month have helped leading homebuilders outperform the broader market and buoyed banks and retailers, but a hawkish surprise from Powell could put pressure on these rate-sensitive sectors.

The housing market, which is significantly dependent on mortgage rates, has seen a recent rally in the homebuilder index. However, this rally had cooled late last year after the Fed lowered its forecasts for the number of cuts it could deliver in 2025. Analysts have warned that multiple interest rate cuts are needed to fully revive the sector, as elevated mortgage rates have strained demand for new homes.

Lenders, on the other hand, usually make more money when interest rates rise, as they can charge borrowers more for loans. But if competition for deposits heats up, banks may need to raise the interest they pay to savers, which could eat into their profits. The yield curve has been steepening, meaning the gap between short-term and long-term interest rates is widening, as short-end bond yields fall on growing expectations that the Fed could resume its cutting cycle.