The buy on dip strategy was predominate yesterday following the worst week in the S & P 500 since March 2023 and the worst week in the NASDAQ since 2022. According to Dow Jones, this is the worst start for September going back to 1953.
September is historically the worst month for the S & P with the climatic or cathartic decline occurring in October. All major groups in the S & P 500 advanced with energy and the financials outperformed.
Treasuries saw mild moves, paring the odds of a 50-bps reduction next week to under 20%, down from 50% at the start of the session. According to a survey conducted by the Fed Bank of New York, inflation expectations have “stabilized” versus declining.
Inflation is a two-part phenomenon…too much money chasing to few goods fearing higher prices tomorrow. Inflation has a monetary and psychological component. Bonds trade on future inflationary expectations and expectations have changed to stabilized.
Many have stated a national election does not impact markets. To date, the campaigns have been nothing other than a side show. A conversation piece, where market complacency is great.
As noted many times, neither candidate has addressed the deficit, an issue many—including the FRB Chair and the President of JP Morgan—state is of great concern where it is not if but rather when it must be addressed. Unfortunately, it may take a crisis to garner Washington’s attention.
Speaking of attention, tonight is the debate. Will this debate be one and done or will others follow?
According to the Media Research Center, since the President renounced his nomination 50 days ago, 84% of stories about Harris have been positive. During the same tenure, 89% of news stories have been negative about Trump.
How will the candidates perform tonight? The New York Times has suggested the honeymoon for Harris may be over and tonight might be of more significance for her rather than for Trump.
Perhaps the only certainty to write is that both parties will declaratively state their candidate did great. But how will the electorate view the discussion?
What will happen today?
Last night the foreign markets were mixed. London was down 0.57%, Paris up 0.22% and Frankfurt down 0.33%. China was up 0.28%, Japan down 0.16% and Hang Seng up 0.22%.
Futures are nominally lower ahead of the key inflation data released tomorrow and Thursday and the specter of something of perhaps significance from tonight’s debate. The 10-year is off 5/32 to yield 3.73%.
