Today the Fed delivered what the market expected – ushering in the start of a new easing cycle with a bang. 50 basis points. It was the kind of bang we saw in 2001, 2007 and 2020. Earlier this week, market’s were pricing in the possibility of a 50 bps as high as 70%. They were right. But despite this, the market closed lower. My guess is the market is not aligned with the so-called “dot plot”…
Interest Rates / Bonds
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Don’t Bet on 50 Bps for Sept.
Do we have a ‘good, solid’ economy or one that’s at risk of a recession? Is the employment market robust or one that’s slowing sharply? Should the Fed cut 50 basis points or 25? And if 50… why? These are not easy questions to answer – as you can make the case either way (pending your lens). Regardless, the popular narrative is one favoring a soft-landing. Jay Powell echoed this sentiment with a victory lap at Jackson Hole. Former Fed Chair Janet Yellen supported this thesis over the weekend…
Back to the Scene of the Crime.. And a Warning from PCE
Eight months down. Four to go. After shedding almost ~10% to start the month – the bulls managed to close the market at its highs. Whiplash anyone? The S&P 500 is back to the point where the markets panicked on a growth scare – however it raises a question: (i) can it break through previous resistance (the all-time high of 5669); or (ii) will it perform what traders call a “back and fill”? My guess is the latter – as we head into one of the weaker months of the year.