Insights Weekly Research Briefing
Not even close. Congrats to Team Red for figuring out what American citizens wanted and what they didn't. The full GOP sweep in Washington D.C. will lead to new excitement and stimulus which is why the equity and credit markets are reacting so positively.
The fork in the road ends this week. After Tuesday, Americans will have selected their future government and the elected politicians will need to find ways to work together to make things better for its citizens. ANY certainty after the election will be a good thing as consumers, business owners and investors will be able to adjust planning for their futures. It is time for "election uncertainty" to disappear from all the business surveys.
If you are a team sports fan, this is your week. World Series, NFL, NBA, NHL, College Football and Global Soccer to fill all 24 boxes of your ESPN+ screen. If you are a political junkie, this is also your week as the candidates make their final pitch into next week's final decision.
The early third quarter earnings reports have delivered solid numbers, and the beating stocks have responded with their best gains in years. This is a positive sign of a healthy financial market. Looking ahead, the mutual fund tax related selling peak will end on Halloween.
The good news for financial risk taking grew louder last week as better than expected earnings, a pickup in M&A activity, and the successful launch of several IPOs hit the market. While it was only week one of the Q3 earning season, most all of the reporting names have a higher stock price today than before the report. The big banks delivered as did Delta Airlines and Pepsi.
Nothing like a positively surprising set of economic numbers to put everyone in a good mood. The 4.05% unemployment rate combined with a +100k beat in the non-farm payroll figure is going to put the Fed's dour year end jobs projections in jeopardy. Say goodbye to any thoughts of a 50 basis point rate cut in November.
So much for a weak September for the stock market. I count only 8 down days out of 20 for the S&P 500 index. September will also make the 5th positive month in a row, and the 10th gainer out of the last 11 months. What is not to like?
After a year of patience, the Federal Reserve finally mashed their main economic gas pedal into the floor. Seeing inflation on track into their targeted zone of 2%+, the FOMC jumped on assisting the economic part of their dual mandate.
Wednesday brings the long awaited FOMC meeting where the Fed will begin its official wind-down of restrictive Fed Fund rates. While the markets assumed that a 25 basis point cut was in the bag, recent winks, nods and quiet conversations with Fed whisperers have pushed the market toward the likelihood of a bigger 50bp cut. The increased appetite seems to be originating from further concerns over the slowdown in new hiring.
September is always a tricky one for the markets as history tends to like to repeat itself. There is not one good reason as to why investors get cold feet during the ninth month. Maybe post-summer jitters? Or the fact that October might be a big fiscal year-end for institutional portfolios and portfolio managers are clearing out the losers early?
The dog days are over The dog days are done Can you hear the horses? 'Cause here they come (Dog Days Are Over, Florence + the Machine)
For economists, mid-August is a time to trade the wingtips for waders and a fishing pole because the Wyoming trout have been gorging all summer and are ready to play. They don't care about the carry trade in Japan or an inflation reading out to three significant digits. That is food on the hook for the rest of us. But not for the trout. It only wants that one perfect fly.
Many U.S. school classrooms begin to fill up again this week. Another year of apples on the teacher’s desk, but this year those apples are the plug-in kind, and not red or green.
Mr. Market would like to apologize for hard kicking your beach chair while you were in a deep slumber. Cutting the Fed Funds rate by 25 basis points last week would have been the easy thing to do. Instead, the Fed has decided to attempt a barrel roll before landing our economic airplane.
It's the last week of July and this will be a busy one both for the markets and in the Olympic swimming pool of Paris La Defense Arena. The FOMC meeting, the monthly jobs data, and biggest week of the earnings season for the S&P 500 are on deck. While the outlook for investors might be getting clearer, there will still be no running allowed poolside.
In the movie theaters, on your November ballot, and inside of your investment portfolio. What a wild two weeks. Inflation data continues to whirl lower.
Moving trucks are getting active in London, Paris and possibly Washington D.C. as political parties on both sides of the Atlantic confront major changes.
Fifty percent of 2024 will be in the books by this weekend. As of now, the S&P 500 is up about 15% which is better than I (and many others) would have guessed six months ago. The economy has been stronger in this first half which has led to a reluctance by the Fed to cut the Fed Funds rate. Inflation has been sticker with core goods falling as expected, but housing has been sticky and insurance prices have been extreme like the weather that is influencing it.
The markets expect little action by the FOMC this week, especially given last week's strong job report. Investors will be sorting through Wednesday's meeting announcement and Fed Chair Powell's press conference, but all eyes are on the horizon for future Fed actions.
Higher for longer? Time to cut? Or maybe it's just time to suit up and go to the beach? While the discussions over economic strength and inflation continue, let me pour you an Aperol Spritz or maybe a Juicy Banger IPA because this could take some time. Hard economic data continues to come out fine while survey data looks less than fine. Consumers are enjoying their financial situation while they think their neighbor's situation is terrible
The pillars of support for the financial markets continue to grow. Last week's mild inflation data and another week of solid earnings led by Walmart gave investors another reason to add to their portfolios.
Time for another monthly inflation measure. April PPI drops on Tuesday and the CPI on Wednesday. Will housing prices continue to be stubborn in their retreat? Will auto insurance again surprise to the upside while the prices of the vehicles that they insure tumble lower?
What a good look for the Federal Reserve in the last week. U.S. Treasury yields fall 20 basis points, crude oil is back below $80, the S&P 500 VIX has fallen to a 13-handle and the major U.S. equity indexes have reclaimed their 50-day moving averages.
The markets dodged a coconut last week. The March PCE inflation statistic came in at +0.32% month over month which is higher than we wanted. But the markets digested the hot figure as corporate earnings were even stronger and many AI capital spending announcements were up in the clouds.
Will this month's rain bring May flowers? We will find out over the next two weeks as 2/3'rds of the S&P 500 will be reporting their earnings and outlooks. Without any relief from interest rates, inflation and the global political situation, it is going to take a stellar set of numbers from the market leading companies to return the indexes to their March highs.
Continued economic strength combined with last week's 'hot' CPI figures have sent Treasury yields 30-40 basis points higher over the last two weeks. Equity markets are fine with small doses of rising yields tied to economic upside, but more than that and stock prices begin to get a fear of heights.
While many await a slowdown, the U.S. economy laughs and shifts into a higher gear. Last week's surge came as a result of Friday's monthly jobs data which showed accelerating job production and tepid wage growth.
Joining the crocus in reaching for the sky last week were the equity markets which moved to new highs for the quarter end. Back-to-back double-digit percentage gains for the S&P 500 is not a frequent event and last happened in March of 2012.
We are so back that you can hear Mark Knopfler and Sting singing in the background... "Get your money for nothing. And your chicks for free."
The financial markets are also enjoying a multi-phase period of time where investors' appetite for assets is large, and companies are increasingly open to fixing balance sheets and transacting operational assets.