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 should expand around 3.0% up from September’s 2.5% projected pace. Goldman also raised its third quarter GDP tracking estimate by 0.3% to 2.8%,
If the third quarter GDP expands by this pace, it would be the third fasted growth rate in 10 quarters, growth only exceeding this 3% level in 3Q23 and 4Q23 when the economy grew by 4.9% and 3.4%, respectively.
The economy expanded at a 2.9% rate during 2Q24.
Asking cynically, is this a soft landing? Or an acceleration?
OK let’s not mess up a good story with data. Monetary policy is partially based upon what may happen in 6-12 months. The overnight rate is currently restrictive but has been for many quarters.
The consistency of this cycle is the unexpected is constantly occurring. Many, including the Federal Reserve, thought the economy would enter a recession over 15 months ago.
There is stuff that is occurring beneath the surface that may not become obvious for several years. Is it the reshoring theme amplified by it is now cheaper to build facilities rather than buy entire companies given the end of zero cost monies?
Has the economy changed so dramatically where yesterday’s gathering process is faulty given the emergence of the “gig economy?” Has the data become partially corrupted via the political process?
Perhaps all of the above.
Today is considerably different than yesterday.
Commenting about the bond market, the yield curve steepened considerably as shorter dated Treasuries rallied and longer dated Treasuries sold off.
What will happen today?
Last night the foreign markets were mixed. London was down 0.76%, Paris down 0.83% and Frankfurt down 0.75%. China was up 0.03%, Japan up 1.53% and Hang Seng up 1.36%.
Dow and NASDAQ futures are flat and down 0.5%, respectively. The 10-year is
