Good Tuesday AM from your Hometown Lender,
I don’t know if you are watching the markets lately, but we are in a topsy-turvy world.
Monday started for us Sunday when Japan’s stock market dropped almost 13%… You know that is going to hurt everyone. Europe pared some of those losses but still fell 2-3% and we watched a similar reaction here at home with equities off by 3-4% (the Dow was down 1100 points). Today the world is calmer. Asia rebounded a bit, the US equities are a bit better as well. Amazingly, a few words from Mr. Powell and a few economic reports (Friday’s jobs report being the most recent and relevant) tossed the world (literally) into a tailspin. Markets look very different today than they did just last Tuesday am. While higher unemployment and a slowing economy are not good for the overall health of the country, they will drive rates lower as we are seeing. Currently, markets are pointing at a 90% chance of a 50bps rate cut in September then another 50bp cut in November, and two more cuts of 25bps in December and January. Think about that for a moment. Markets went from looking at maybe 1 cut in 2024 to now 150bps of cuts. While rates are going to come down quickly, they will not drop nearly as fast as we are all hoping for. There is so much information to share, candidly, too much. I will share a bit of the headline news in pictures (and a few words) and will continue to follow up with more as things unfold.
Global bonds erased their losses for the year…
As concern the US economic outlook is rapidly worsening spurs demand for fixed-income assets. Meanwhile, traders ramped up bets that the Federal Reserve will step in with an emergency interest rate cut, putting the odds at 60% for a quarter-point reduction within one week. Treasuries posted small moves after a rally that sent the 10-year yield to the lowest in a year and a gauge of the dollar dipped.
Unemployment right now it’s on the rise.
Maybe next month the unemployment rate will drop. But from a risk management standpoint, there’s a good reason to think it’s heading higher (because it tends to trend) and as of Wednesday, the Fed didn’t seem to be in risk management posture.
Bankruptcy filings are at the highest level in more than 12yrs.
Stay safe and make today great!
