Market Snapshot August 21, 2019
Good Morning on this fantastic Wednesday,
The only data set released today in the US was existing home sales. It came in a bit stronger than expected but markets are unmoved by it. Stocks are up and I have to assume it is on expectation on what may come from the Fed minutes of the last meeting which will be released in a few hours. More rate cuts mean lower corporate loan rates/interest expense as well as a weaker dollar. Both are a win for stocks. It will of course also help bonds which are up marginally as well. Additionally, Mr. Powell will drop some knowledge on us all tomorrow as he speaks at the big banking convention in Jackson Hole. This can and likely will be a market mover. It will be interesting how Mr. Powell defends the Fed’s position when Mr. Trump has repeatedly called for bigger rate cuts, and despite an unorthodox style, has been right. The Fed is certainly behind the curve. React quickly and react strongly. The Fed has done neither. The 10-yr yield has been bouncing between mid-150’s and high 150’s and I think that is just right and setting up for the next move to lower yields in the 130’s… sssh… don’t tell anyone. I am concerned that with 7 or so other nations already in a recession, stock market gains are a set up for a big (big) fall. I think bonds avoid much of the pain but I can’t say that for stocks.
If you’re keeping score as I sometimes do, Futures have 98% probability of 25 bps Fed rate reduction in September, 73% of additional 25 bps in October, and 47% of additional 25 bps in December.
Make today great!