The quarter is almost over, the worst quarter since 2023, primarily the result of tariff uncertainty. All averages are negative for the year and according to Bloomberg anyone who has put an equal monthly sum into the NASDAQ 100 during the past 15 months is now down. How will this affect sentiment especially if the buy on dip strategy of the last 20 years is no longer in vogue?
The “hard” economic data is continuing to indicate the economy is on a “strong footing,” however many are adamantly stating that this will not continue as inflation/stagflation/recession is all but eminent, declarations like the ones made as to when the Fed increased the overnight rate logarithmically from 0.00% to 5.25%.
Legendary Democratic Strategist James Carville has suggested the Democratic Party do nothing. To sit back and watch the economy implode, the result of the Administration’s policies. After the implosion occurs, Carville states the Party of Andrew Jackson and Thomas Jefferson will be ushered back into power.
Perhaps the only certainty to write is the unexpected is continually occurring. The macroeconomic and geopolitical landscape has changed and is continuing to change at an unprecedented and unpredictable manner or pace.
Commenting about the Treasury market, the yield curve is now the steepest since early 2022. The 30-year benchmark is now at the highest yield since February, increasing in yield while at the same time the 2-year Treasury declining in yield.
The increase in longer dated yields is the result of rising inflationary expectations while at the same time recognizing the unsatiable demand for monies by the federal government. Over $9 trillion in Treasuries must be rolled over during the next 12 months.
There is little concern that an auction will fail, however fears are rising at what price/yield the new longer dated debt will be forced to be issued.
The Two-year Treasury—or the instrument most sensitive to monetary policy– has declined in yield because of expected monetary policy…aka two interest rate cuts by year’s end
Today the monthly PCE Price Index is released, a key inflationary indicator of the Federal Reserve. Prices are expected to remain unchanged from last month’s level. The year over year level is expected to rise minimally.
The odds are high that if the data does not match expectations, volatility may rise.
Last night the foreign markets were down. London was up 0.16%, Paris down 0.56%, and Frankfurt down 0.59%. China was down 0.67%, Japan down 1.80% and Hang Seng down 0.65%.
Dow and NASDAQ futures are down 0.25% and 0.50% as the PCE was slightly higher than expected, indicating stubborn inflationary pressures which may rise given today’s environment. . The 10-year is up 8/32 to yield 4.34%.
The 10-year is up 8/32 to yield 4.34%.
