August 19, 2024
Good morning,
Last week’s market action was a fresh reminder of the old adage; Don’t Fight The Tape. Recall the markets behavior leading into last week when it pulled itself out of the massive Monday morning hole that the Carry Trade Crisis had dropped it down. Last week was one of the strongest weeks of this bull market cycle, driven by the recovery momentum just mentioned, benign inflation data, a robust retail sales report, and another weekly initial claims report that came in below estimates. Good inflation data, good growth data, and good jobs data are about as Goldilocks perfect for equities as possible,and it showed in the indices. On the week; SPX +3.91%, NASDAQ +5.35%, Russell 2000 +2.98%, EAFE +4.09%, EM +2.91%
It is late summer, most companies have reported their earnings, and economic data is thin this week. It should be a fairly quiet one, at least until Friday when Chair Powell speaks at the Feds Jackson Hole Symposium. The next Fed meeting is 30 days away, and following last month’s surprise, this month’s now all-important employment report is 18 days away. Credit markets are currently pricing in a 100% probability of a rate cut in 30 days. That 100% is distributed 75% / 25% for -25 bps and -50 bps cuts respectively. If Chair Powell is true to recent form, he will try to discourage those calling for 50 bps. That may mean slight disappointment for stocks, but I wouldn’t expect a stronger reaction than slight.
If things go according to plan, there will be no Morning Note this Thursday – it’s summer vacation time for us this week. Hope you have a great week, wherever you are.
Be well,
Mike
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