Treasury yields declined nominally as the Fed’s preferred gauge of underlying inflation rose mildly in August. The core PCE was up 0.1% from July and 2.7% from a year ago. Last month the 12-month increase was 2.6%. The data largely met expectations. The yield curve steepened. The markets have fully discounted an additional 175 to … Read more
Yesterday’s data exceeded expectations, causing many to again question the pace at which the Federal Reserve will lower interest rates. Some have postulated that Wall Street is determined to “jawbone” the Fed into action for numerous reasons including the proverbial “talking your book” to more nefarious reasons such as perhaps attempting to influence the outcome … Read more
Equities struggled to find direction as the market ponders the path of rate cuts. Moreover, third quarter earnings season commences in about two weeks and there are some concerns that estimates may be too lofty. As noted many times, about 90% of trading is done via technology, utilizing algorithms that are primarily based off of … Read more
Moody’s warned yesterday “the next Administration must grapple with widening budget deficits…the Administration’s tax and spending policies will affect the size of future budget deficits and the expected decline in fiscal strength, which could have a significant effect on sovereign credit profile.” The ratings company further stated “the debt dynamics would be increasingly unsustainable and … Read more
About 19 or 20 years ago I was introduced to the works of Hyman Minsky. A basic tenant of his economic philosophy is stability leads to instability. His work focused on economies that are hooked on debt; excessive borrowings fuels financial instability. Minsky believes that change happens slowly, then suddenly. An analogy used to explain … Read more
Where to now? September is regarded as the worst month of the year for the markets with the climatic event occurring in October. The markets are devoid of liquidity, and direction is primarily determined by momentum and technology-based trading, the direction of which is heavily influenced by five-word headlines. It is widely accepted that the … Read more
Led by the mega techs, equities staged an impressive rally believing the Federal Reserve will be able to engineer a soft landing. Markets declined nominally on Wednesday after the decision was made. Some pundits asked what changed between Wednesday and Thursday? As noted several times, the Atlanta’s Fed GDPNow Index currently suggests third quarter GDP … Read more
The narrative surrounding the near simultaneously explosion of the Hezbollah pagers is rising. How did it occur and what are the ramifications? “Unnamed” senior US officials report “a sophisticated supply chain infiltration occurred;” a comment made when a US official stated that Isreal was behind the pager attack. There were reports yesterday that there are … Read more
Will the markets be disappointed? Bloomberg writes this is the second longest time between a rate hike and rate cut but is the strongest market return between a hike and a cut ever. Is the environment conducive for the proverbial buy on rumor and sell on fact outcome? An argument can be made market volatility … Read more
The most anticipated change ever forecasted for the federal funds rate is at hand. The question is how much? At the close of trading last week, the odds of a 50-bps reduction were zero. Yesterday a Bloomberg headline read Traders See Half Point Rate Cut Likelier Than Quarter Point. Swaps tied to tomorrow’s Fed decision … Read more
