To The Moon

The heavy sell-off in tech stocks on Tuesday, August 19, 2025, is widely attributed to investor caution ahead of the Jackson Hole Economic Symposium, which is scheduled for August 21-23. The market is currently undergoing a rotation out of tech, and the meeting's outcome could determine whether this trend continues.

Here is a breakdown of the key factors:

1. Market Rotation and Tech Sell-off:

The tech-heavy Nasdaq Composite and S&P 500 saw significant declines on August 19, with major tech companies like Nvidia, Broadcom, and AMD experiencing notable drops. This is a continuation of a recent trend where investors are taking profits from the tech sector, which has seen a strong rally, particularly due to the AI boom.

We can see that Communication Service and Technology sectors which consists of those big tech names like $Amazon.com(AMZN)$, Nvidia (NVDA), Broadcom (AVGO) and Advanced Micro Devices (AMD) have suffered significant decline.

There are signs of a broader market rotation, with money shifting from large-cap tech and growth stocks into more defensive or value-oriented sectors like real estate, staples, and utilities.

One of the stocks which have been doing pretty well is $Microsoft(MSFT)$, if you looked solely at the daily chart, you can see that it have good positive momentum, and also the bulls are in good control and are making daily uptrend continuation from July into August.

If we pay attention to the infamous 12-EMA on the monthly chart, we would see that it is far away from the 12-EMA level which is signaling a significant pullback is going to happen, later in the other section, I will show you more example using the S&P 500 sector groups and why some of the real estate, staples, and utilities are doing better, but we need to be cautious about utilities though.

MSFT is already very far away from the 12EMA when we looked at the monthly EMAs, and this pullback need to happen to bring it back close to the 12EMA.

2. Jackson Hole Symposium and Its Significance:

The annual Jackson Hole meeting is a major event where central bankers and economists discuss long-term policy issues. Historically, this has been a platform for the Federal Reserve Chair to signal potential shifts in monetary policy.

This year, all eyes are on Fed Chair Jerome Powell's speech on Friday, August 22. Investors are looking for clues about the future path of interest rates, especially whether the Fed will proceed with an anticipated rate cut in September.

3. Potential Outcomes of the Jackson Hole Meeting:

Continuation of the sell-off: If Powell's speech is more hawkish than expected, emphasizing that the Fed needs to see more data before cutting rates due to lingering inflation concerns, it could disappoint the market. Higher interest rates are generally a negative for growth stocks, like those in the tech sector, because they increase borrowing costs and reduce the present value of future earnings. This could fuel further rotation out of tech.

A halt or reversal of the rotation: If Powell's comments are dovish and he signals a clear path to a rate cut, it could ease investor concerns and potentially halt or even reverse the current rotation. Lower interest rates would make tech stocks more attractive again, as they would have more room to grow.

Market uncertainty continues: The most likely scenario is that Powell will be cautious and noncommittal, reiterating that policy decisions are data-dependent. This could lead to continued market volatility as investors await more concrete economic data, such as the next nonfarm payrolls report and inflation figures.

The tone of Federal Reserve Chair Jerome Powell's speech at the Jackson Hole Economic Symposium is a key factor that will determine whether the current market rotation out of tech continues. The market is highly sensitive to his words because they can signal a shift in the Fed's monetary policy, particularly regarding interest rates.

Here are three scenarios based on the tone of his speech:

Scenario 1: A Hawkish Tone (More Likely to Accelerate the Rotation)

A "hawkish" tone means Powell prioritizes controlling inflation, even at the expense of economic growth. This would be a disappointment for the market, as many investors are betting on a September rate cut.

What he might say: He could express a "wait-and-see" approach, stating that the Fed needs to see more definitive evidence that inflation is on a sustainable path back to its 2% target before it can confidently lower rates. He might highlight persistent inflationary risks, such as those from tariffs or an unexpectedly resilient labor market.

How it would affect tech: Higher-for-longer interest rates are a negative for the tech sector, especially for growth companies that rely on borrowing to fund future projects. Higher rates increase the cost of capital, making future earnings less valuable in today's terms. This scenario would likely lead to:

Further sell-off: Tech stocks, which have high valuations and are often sensitive to interest rates, would likely see a continued sell-off as investors pull money out of the sector.

Accelerated rotation: The rotation into more defensive or value-oriented sectors (like utilities, real estate, and consumer staples) would likely accelerate as investors seek more stable returns in a higher-rate environment.

Scenario 2: A Dovish Tone (More Likely to Halt or Reverse the Rotation)

A "dovish" tone means Powell is more concerned with supporting economic growth and employment. This would be a welcome surprise for the market and could provide the catalyst for a tech rally.

What he might say: He could signal a clear path to a rate cut, perhaps citing recent data showing a cooling labor market and benign inflation. He might emphasize that the Fed is prepared to act to prevent an unnecessary economic slowdown.

How it would affect tech: A dovish tone would be a powerful positive for the tech sector. Lower interest rates make future earnings more valuable, which is a significant tailwind for growth stocks. This scenario could lead to:

A "relief rally": The sell-off in tech stocks would likely halt or reverse as investors regain confidence in the sector's growth prospects.

A reversal of the rotation: Money would likely flow back into tech and other growth sectors, as the appeal of defensive assets diminishes.

Scenario 3: A Balanced or Nuanced Tone (Continued Uncertainty)

This is a highly plausible scenario, where Powell tries to balance both hawkish and dovish concerns without committing to a specific path.

What he might say: He could acknowledge both the progress on inflation and the signs of a cooling labor market, but also stress that the Fed remains "data-dependent." He might highlight the uncertainty in the economic outlook, avoiding any strong signals for a specific policy action at the next meeting.

How it would affect tech: A balanced tone would likely lead to continued market volatility. Investors would be left to interpret his comments, and the market would likely remain in a state of flux. The rotation out of tech may continue, but at a more moderate pace, as investors await more concrete data and signals from the Fed's upcoming meetings.

How We Can Prepare For These Scenarios Possibility

From what I have shared briefly on one of my post, I am watching the rotation, so this did not come as a surprise, but we need to know how we are doing to adjust our portfolio or position.

One of the things that I can share is the infamous 12 EMA on the monthly timeframe, as you can see one example above for Microsoft. Now I will show you why $Technology Select Sector SPDR Fund(XLK)$ have such a significant decline.

As we can see from the monthly EMAs, XLK is currently far away from the 12-EMA level, and a pullback cannot be avoided if you looked at how the past pattern have also shown similar behavior.

Whereas we looked at $Consumer Staples Select Sector SPDR Fund(XLP)$ , where we can see the consumer defensive stocks are having a good green day, looking at the monthly EMAs, you would noticed that it is trading near or below the 12-EMA, so this is the same reason why there is no pull back seen from this sector.

Now we moved onto another sector, $Real Estate Select Sector SPDR Fund(XLRE)$ where we are seeing real estate names having a pretty good day which helped to keep the S&P 500 within any significant decline. You can see that XLRE is not trading far away from the 12-EMA, and it is trading near the 12-EMA level.

Final Note

What I would be doing is to plan for getting XLP and XLRE stocks and the ETFs for short to mid term into my portfolios, while we wait for Jackson Hole meeting whether it could bring the rotation back to tech. If we looked at the chart, the possibility is rather slim, so we need to prepare ourselves for some more significant pullback on the technology and communication services sector.

Summary

The Jackson Hole meeting is a critical event that will heavily influence market sentiment. The current rotation out of tech is largely a result of uncertainty surrounding the Fed's future policy. Whether this trend stops or accelerates will depend heavily on the tone of Fed Chair Powell's speech.

The market is currently in a "holding pattern" ahead of Jackson Hole. A hawkish tone would confirm investor fears and likely accelerate the rotation out of tech. A dovish tone would provide a strong catalyst for a rally and a potential reversal of the rotation. A balanced tone would likely leave the market in a state of uncertainty, with the current trends continuing until a clearer picture emerges.

Appreciate if you could share your thoughts in the comment section whether you think Jackson Hole could help to make a difference on how the current rotation trend would move or behave.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.