Home Depot is a bellwether stock on the consumer, housing market health and construction/ building activity.

They reported this morning.  Let’s talk about the takeaways …

On tariffs, HD is pulling back promotions in tariffed categories while negotiating lower vendor costs elsewhere — effectively absorbing tariff pressure before it hits the customer.

That said, importantly, HD margins are holding steady.  So, they are successfully mitigating the price pressures, for the customer and the company.

As for business activity, small projects are strong.  But big projects have stalled. Debt-financed projects are on hold, because of rates.

Bottom line from HD:  The economy is steady.  Employment, wage gains and home equity are keeping homeowners spending, but big ticket items remain hostage to rates.

The resumption of the Fed easing cycle is the release valve.

Will we get a “release valve” signal on Friday?

As we’ve discussed, the annual economic symposium in Jackson Hole has historically served as a platform for central bankers to communicate important signals regarding policy adjustments.

Jerome Powell will give a prepared speech Friday morning titled, “Economic Outlook and Framework Review.”

Now, it’s possible that this could deliver the opposite of the what the market is looking for.

This “Framework Review” is a review of the Fed’s 2012 monetary policy framework, where they established the 2% inflation target.

They “reviewed” this framework in 2019-2020, where they added some flexibility that they thought they needed after dealing with the decade-long, post-GFC economic malaise (persistent low growth and low inflation, even with monetary policy at full throttle).

They thought this malaise was “the new normal.”  So, in 2020, when inflation was still sub-2%, Jerome Powell formally amended the inflation target criteria, saying they are just looking to “average” 2% over time.

He was signaling that they would let the economy run hot (for an unspecified period of time), letting inflation run above 2%, to make up for the decade of below target inflation.’

They also adjusted the way they respond to the labor market.

Before 2020, the Fed viewed a tight labor market as inflationary.

As part of the framework review, they abandoned that as a hard and fast rule — saying that low unemployment alone would no longer be enough to justify tightening.

This was all an effort to signal to markets that they were determined to keep policy ultra-easy, in order to sustainably escape from the sluggish, deflationary economic conditions of the post-crisis era.

Then came the pandemic.  The pandemic response.  And four decade high inflation.

With all of that in mind, in a speech three months ago, Powell telegraphed the return to the normal settings on the framework (i.e. back to the strict 2% target, and back to assessing a tight labor market as inflationary).

If this is codified in the speech on Friday, this would not be the “relenting to White House pressure on rates” the market is hoping for.

Trump and Bessent have amplified the “shadow Fed” in recent days by identifying a long list of Fed chair “candidates” that are now credible voices on monetary policy.

We’ve talked about names like Kevin Hassett and Kevin Warsh in recent weeks, and now we’re hearing from others — all are publicly articulating the case for lower rates.

Reported candidate Rick Rieder, Blackrock CIO, said the Fed could afford to get rates down by 100 bps quickly.

Candidate Jim Bullard, former Fed President, said rates could be 100 bps lower by this time next year (a statement that probably doesn’t get him the job).

Reported candidate David Zervos, strategist at Jeffries/former Fed economist, said there’s a case for significant rate cuts, and even suggested the Fed should re-examine their decision to hold, given the new information on the labor market (implying an intermeeting cut).

And Scott Bessent himself, the Treasury Secretary, who maybe has the most powerful opinion on who will become the next Fed Chair, said today that the Fed is behind, based on the soft labor data, and “could” start with a 50 bps cut in September.  And he said we should probably be 150-175 basis points lower.

And remember, Trump has said many times over the past month that rates should be much lower, like 3 points lower (close to 1%).

His argument is that U.S. rates should be the lowest in the world, because it’s the safest, most liquid borrower in the world, with the reserve-currency, rich asset base and perfect debt-service record.

This hasn’t been taken seriously, but maybe it should be — because it’s the President, reframing the Fed’s mandate to permanently price U.S. short term borrowing off its hegemonic credit profile.