Good morning,
Although the weekend headlines were dramatic, they apparently weren’t dramatic enough to really rattle markets this morning. As of 8 am EDT, futures are up +0.65%, and bonds have given back Friday’s gains. Same story globally—equities are bouncing even as tensions in the Middle East continue. Maybe investors are taking their cue from oil, which gapped higher Sunday night but has since turned red. Or maybe it’s just the usual playbook: traders trimmed risk on Friday to avoid weekend surprises, and now they’re jumping back in.
All that positioning noise aside, markets may stay a bit jittery over the next few days given the Middle East backdrop and Wednesday afternoon’s remarks from Fed Chair Powell, following the conclusion of this month’s two-day FOMC meeting. With so much uncertainty still in the air—tariffs, immigration, the tax/budget bill, and now Friday’s attacks—the futures market is signaling near certainty the Fed stands pat this week.
Quick sidebar: certainty in the futures market is rare—and dangerous. As the saying goes, when everyone’s thinking the same way, no one’s really thinking. I’m not predicting anything dramatic, but the setup is unusual enough that a surprise is on the table. In this case, if the Fed were to cut—or even hint that a cut is coming—it could actually be an upside surprise.
Thursday is a market holiday, and Friday could be a low-volume drift, with everyone eyeing a four-day summer weekend.
We’ll be back with the Morning Note next Monday. Have a great week.
Be well,
Mike