Federal Reserve Chairman Jerome Powell is in a tough spot. It’s Friday, and all week there has been a build-up to his speech at the Fed’s annual symposium in Jackson Hole, Wyoming. By this point, everyone is sick of listening to those who are trying to front run what he’s going to say. Here’s what I think the Street knows: 1. Everyone in the Fed, whether they are hawks or doves, has said fighting inflation is their top priority and even if there is a recession, they are committed to bringing it down. 2. The fact that all the Fed members are for the most part speaking in sync and that Powell represents the views of the rate-setting Federal Open Market Committee indicate that is exactly what he will say. It is also widely expected he will again push back on the idea of a “Fed pivot,” and note that the Fed will keep raising rates until it feels inflation is under control. 3. The market has already internalized this hawkish sentiment. Expectations for the fed funds rate are higher now than they were a couple months ago. 4. What would make stocks drop dramatically on Powell’s speech? If he sounded far more hawkish than the market expected. Anything that would push expectations for a “terminal” Fed funds rate past what is currently expected (about 3.5%). If for example, he said he would support a 100 basis point rate hike in September, or if he said, “We are going to bring inflation down and we don’t care if in the process of doing that we have the greatest recession since the 1930s.” Stocks have indeed faltered in the last week as the market has focused on these fears. 5. What would make stocks go up on Powell’s speech? The opposite: if he hinted Fed sensitivity to inducing a severe downturn, or hinted the Fed might end its rate hiking program this year, or hinted that the Fed has already made “substantial progress” toward its goal of reducing inflation and that we can expect smaller rate hikes in the future. But the bar for a modest rally is even lower: as long as he doesn’t sound more hawkish than he already has been, stocks could simply lift on a relief rally. 6. Unfortunately, the market Thursday seemed to want to front-run this expectation. The S & P rose 20 points in the last 40 minutes on virtually nothing. 7. Even more unfortunately, even prior to Thursday, the market already has had a bit of a relief rally. Not only are prices up, but valuations are substantially higher than they were two months ago, with the S & P trading at north of 18 times forward earnings, up substantially from 16 times forward earnings in June. Bottom line: It’s reasonable to assume Fed officials are not delighted with the recent market rally, so Powell will want to dampen the dovish expectations. But he can’t dampen them too much. He is playing a very long game, one that — once the game starts rolling — makes it harder to change the rules midstream.