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Buy Or Sell Amazon Stock Ahead Of Jackson Hole Speech?

Fed chairman Jerome Powell will speak this Friday, and the markets could react to news on monetary policy. Here is what Amazon stock investors should do.

This could be an important week for stocks and bonds. On Friday, Federal Reserve chairman Jerome Powell is scheduled to give a speech on the economic outlook and monetary policy during the annual Jackson Hole, Wyoming symposium.

Those who have been following the action closely since the start of the COVID-19 crisis will probably agree that central banks have assumed a crucial role in the performance of the global economies and the markets.

Could this Friday’s Jackson Hole event have an impact on Amazon stock  (AMZN) - Get Amazon.com, Inc. Report? Today, the Amazon Maven explores the topic in more detail.

Figure 1: SEC headquarters in Washington, DC.

Figure 1: SEC headquarters in Washington, DC.

(Read more from the Amazon Maven: 3 Expert Opinions On Amazon Stock: Is It A Buy?)

The possible implications

The main development coming out of Wyoming that could impact the markets is potential news on monetary tightening. It is unlikely that Jerome Powell will announce tapering this time (i.e. the scaling back of the Fed’s bond purchase program), but he could hint at it happening sooner rather than later.

Obviously, Amazon would not be directly impacted by whatever happens this Friday. But the stock could react to forces influencing the broader market. For instance, hawkishness could lead to a spike in yields. If this happens, growth stocks like AMZN could take a hit.

What the market expects

Regardless of what happens in Jackson Hole, I believe that higher intraday volatility on Friday is a reasonable expectation, as speculators on both side of the argument make their bets. When it comes to Amazon stock, however, the market seems to think the opposite is more likely to happen.

According to BarChart, the implied volatility measured by the price of at-the-money Amazon call options that expire on August 27 is only 19.5%. This figure compares to the stock’s much higher historical volatility of 30.5%. In other words, the options market seems to believe that AMZN will hold steadier-than-average during this eventful week for central bankers.

Amazon Maven’s take

I must admit that I am not much of a short-term trader. In the case of long-term, secular growth stories like Amazon’s, I believe that trying to predict day-to-day price movements is a particularly futile exercise. Not unlike Apple stock (AAPL), I think AMZN shares are worth buying and holding for a while.

My recommendation to Amazon shareholders is to ignore any noise that may come out of Wyoming this week. If the stock takes a substantial hit due to monetary policy concerns, consider buying the dip (of course, this will be highly dependent on each investors’ portfolio goals and risk tolerance).

Those who are feeling too uneasy about short-term volatility could even consider buying puts that expire this month or early next week. As highlighted in the section above, the “insurance policy” currently looks affordable.

Twitter speaks

Recently, the @AppleMaven asked on Twitter: if you were forced to pick only one of the following stocks for your portfolio, at most, which would it be: Apple or Amazon? Below are the responses.

Explore more data and graphs

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Amazon Maven)