Jackson Hole will be a 'buyable event' for stock investors whether Powell's comments are hawkish, dovish, or vague, Fundstrat's Tom Lee says

• Jackson Hole could spark a rally for markets whether Powell is hawkish, dovish, or something in between.
• That's according to Fundstrat, which says inflation is showing signs of coming under control.

All eyes are on Federal Reserve Chair Jerome Powell at Jackson Hole on Friday morning, with markets feeling jittery about what the head central banker might say — but investors should think of the event as a buying opportunity no matter what Powell says at the event, according to Fundstrat.

The firm's head of research, Tom Lee, called Powell's speech "a buyable event" in a note on Thursday, adding that a market rally would take shape whether he decides to stress continued tightening of monetary policy, makes a dovish pivot investors are hoping for, or if he's ultimately vague about the Fed's next move.

Most investors think Powell will try to temper the market's optimism at Jackson Hole – but there's evidence that the Fed doesn't need to tighten much further to get a grip on inflation, Lee said.

"We think there is growing probabilities inflation weakens faster than consensus expects," Lee said, adding there are signs that the implied Fed funds rate was actually 90 bp tighter than it needs to be.

The 12-month forward, a measure of inflation expectations a year from now – currently sits at 2.7%, although the implied policy rate by year-end is 3.6%, according to data from Bloomberg.

Despite July's 8.5% Consumer Price Index reading, Lee noted that CPI often lags behind actual inflation in the economy, with changes taking up to a year to show up in reports.

And besides the declining CPI, there are other signs inflation is starting to come down. Regional Purchasing Managers' Indices, which measures the prices that manufacturers are paying, have cooled, according to data from multiple Fed banks. Oil and commodities prices are also falling, in line with consumer inflation expectations, according to the Federal Reserve Bank of New York.

That could mean the Fed isn't as behind on the inflation curve as some investors are anticipating – good news for investors hoping for another market rally by year-end, Lee said, who previously predicted the the S&P 500 would reach all-time highs before 2023.