What to expect from Jay Powell’s Jackson Hole speech

0:01Good morning from the Financial Times. Today is Wednesday, August 20th, and this is your FT News briefing. Investors might be starting to lose their penchant for AI stocks. And Jay Powell is heading to his final Jackson Hole symposium as Fed chair. Plus, Novo Nordisk has fallen behind in the weight loss race. We'll look at how it's trying to catch up. I'm Sonia Hudson, and here's the news you need to start your day.

0:36Investors have the AI jitters. The tech-heavy Nasdaq composite fell 1.5 % yesterday. That's its biggest one-day loss since August 1st. Meta and NVIDIA saw their stocks drop 2 % and 3.5 % respectively. Palantir shares fell a whopping 9.4%. Investors are starting to question whether the prospects for AI will actually pay off. The declines came just a few days after OpenAI CEO Sam Altman hinted that an AI bubble may be forming. Plus, a report by a branch of the Massachusetts Institute of Technology came out this week. It said, quote, 95 % of organizations are getting zero return from their investments in generative AI.

1:25And this AI sell-off is bad news for the rest of the equities market. Tech stocks, especially the ones with AI strategies, are pretty much propping up the S &P 500 right now.

1:43You're going to be hearing a lot about Wyoming this week. The Jackson Hole Economic Policy Symposium is taking place there. and investors will be hanging on every word from Federal Reserve Chair Jay Powell. His big speech is on Friday. Here with me to talk about the symposium and what we might expect from it is the FT's U.S. Economics Editor, Claire Jones. Hey, Claire. Hi, Sonia. So, Claire, you're flying off to the beautiful state of Wyoming later this week. Remind us why this meeting in Jackson Hole is so important. So think of Jackson Hole as the nearest the central banking world has to Davos.

2:23It's the big conference on the sort of global monetary policy calendar. And the reason why Jackson Hole has always been such a big deal is, I think, two reasons. One, we get a sense of, you know, how policymakers are thinking about the economy. We also always have a speech by the Fed chair. And that speech, more often than not, is designed to give a read on what is going to happen next to interest rates. So you mentioned Fed Chair Jay Powell's big speech, and I think this will be the last time he'll speak because his term ends next year before the symposium. Talk to me a little bit more about the Jay Powell of it all.

3:12You know, we've been watching him really closely, given how things have unfolded since U.S. President Donald Trump retook office. This is always a high stakes moment about doing this speech. I think at the moment, clarity is impeded by two factors. One is that there's a lot of dissent from within the Federal Reserve. We saw at the July meeting, two of the central bank governors voted in favor of rate cuts, while Powell and the rest of the committee held borrowing costs. We're also at a very kind of difficult moment to read for the US economy. we've seen a very gloomy non-farm payrolls report, which suggests that the labor market is weakening, something that would usually prompt the Fed to cut.

3:59But, you know, you're starting to see some of the impact of Donald Trump's trade war on the U.S. economy. So it's a very difficult balancing act that Powell faces here. And what about the tension that we've seen between Powell and President Trump. So the backdrop of all of this is not just the beautiful Teton Mountains. Although that will be the backdrop, literally. Well, the literal backdrop will be the Teton Mountains. But it's also just coming at the time when the Fed as an institution is really under fire. And that's really been symbolized in these very personal attacks that Jay Powell has come under from Donald Trump.

4:45We know Trump wants interest rates to be a lot lower than they are right now. Powell won't be influenced by what Trump says, but whether or not he sees room within the economic data we've had in recent weeks and will get in the weeks to come to really do something like a 25 basis point cut in September. So a lot is hanging on what he says on Friday. What can Powell say that will give investors some clarity about where interest rates are headed? I think what people will be looking out for is the degree to which he continues to urge a patient approach, saying things like we think the benchmark interest rate is now at a point where it's not doing too much damage to the economy.

5:29The degree to which he emphasises the importance of the unemployment rate, seeing how concerned he sounds about the latest readings for CPI and producer prices will also be important. The other aspect of his speech is given a review of what the Fed's overall monetary policy framework is likely to be in the next few years. The Fed has been conducting a kind of broader overview of the framework under which it makes decisions. He's expected to say a little bit on that, too. Claire Jones is the FT's U.S. economics editor. Thanks, Claire, and have fun in Jackson Hole. Thank you very much, I shall.

6:15Shares in Novo Nordisk have jumped over the past few days. On Monday, it said it was slashing the price of its diabetes and weight loss drug Ozempic for Americans without insurance. The new price of the drug is$499 a month. The Danish group also announced it would offer the shot for home delivery. This is a rare bright spot for a company whose shares are down 60 % over the past year. I'm joined by the FT's Hannah Kushler to talk about Novo's highs and lows. Hi, Hannah. Hello. So tell us about the bumpy ride that Novo Nordisk has had in the past year. Yeah, so the company, if you take you back to June 2024, it was really riding high.

7:03I mean, it was regularly Europe's largest company by market cap. It was a huge company based on the success of its weight loss drugs. So you will know them as WeGavi or as Mpik, which is also used to treat diabetes. But quite quickly from there, it began to struggle. And so there's a couple of things that maybe have influenced that. There's how it's performing in the current market. So it's losing ground to Eli Lilly. And then there was also concerns about the drugs in its pipeline because investors are always looking ahead in pharma. They know that your drugs are going to go off patent and you need to have some really good stuff to replace it.

7:45And especially around December last year, the stock plummeted over 20 % in one day because it disappointed the market with one of its next generation drugs called Cagre-Semo. Now, Hannah, you mentioned Eli Lilly. Why is Novo Nordisk losing market share to it? What went wrong? So, I mean, some people would just say it's as simple as, like, Lily has a better drug, right? So Lily's drug offers, like, if you look at the trials, it offers, like, more body weight loss. But the picture is also a bit more complicated. Novo was first to the market, but it had loads of supply problems. Like, it just did not anticipate how popular these drugs were going to be.

8:27And so some analysts say, well, you know, doctors were saying, I've prescribed this two, three times, and my patient comes back and says, I can't get it, I'm just going to switch to the Lilly drug. There's also another complicating factor, which is, even though it should just be Novo and Lilly selling these drugs, there's a whole bunch of what were called in the US compounders, and they sell these like replica or copycat versions of the drugs, often much, much more cheaply. That was allowed by the FDA because of the shortages. It's now being cracked down upon. But the companies are finding loads of ways to try and continue the market.

9:03And that's been a real sort of unexpected threat to Novo. So do you think then that this latest move to offer home delivery and to slash the price of Ozempic, will that fix Novo's problem? No. I mean, I think, you know, your shares are up. They're up about 6%. So I think if the market thought it was going to fix all the problems, we'd expect a bigger rise. I mean, I think that unlike normal drugs, like, you know, if you've got cancer or something, you don't tend to buy them out of pocket. With these obesity drugs, because insurance coverage hasn't been so good and because people can see the impact they want to slim down, there has been this huge sort of consumer market for them.

9:45So this is Novo sort of improving its position in that market of people paying for their own drugs. But it is still like not as big as the insured market. And$4.99 a month is still more than many compounders offer. So I think it improves their position, but it's not revolutionary. Hannah Kuchler is the FT's global pharmaceutical editor. Thanks, Hannah. Thank you.

10:16before we go the labubu craze is paying off big time for the toys manufacturer the collectible plushies with exaggerated facial expressions are incredibly popular right now and they've helped the chinese company potmart triple its sales in the first half of this year labubus are going viral across the globe. And celebrities like Rihanna and David Beckham love them. Plus, they can go for thousands of dollars on the secondary market. But are LaBooBoo's here to stay? Or will the hype fade just like the Beanie Baby mania did in the 90s? You can read more on all these stories for free when you click the links in our show notes.

11:01This has been your daily FT News Briefing. Check back tomorrow for the latest business news. Thank you.

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