Market Notebook
Discussion –
PRICE ACTION:
Equity prices, as measured by ticker SPY, and bond prices, as measured by ticker BND, closed higher on the week.
TECHNICAL ANALYSIS:
The sharp recovery in SPY price action over the past three weeks suggests near-term consolidation. Any transition to an upward trend would require the price to exceed the July highs.
Even though the BND price has also recovered sharply, bonds appear to be established in a downward trend. The sharp moves higher in price suggest the possibility of transitioning to consolidation.
SENTIMENT:
Market participant sentiment suggests short-term optimism on interest rates.
ECONOMY AND FUNDAMENTALS:
Economic indicators within the Market Notebook remain mixed.
Jobless claims are to be watched as an important indicator of a potential recession. Thus far, jobless claims are not indicative of a near-term recession.
Periods of relatively higher interest rates translate into slower economic activity over time. The current rate environment continues to act slowly to restrain activity.
Recent inflation data suggests the Federal Reserve rate hikes are having the desired effect and are slowing economic activity. Prior to the past few weeks, the danger was that the Federal Reserve had not done enough to slow inflation. Given recent economic data points, the fear is that they have done too much, and the economy will overshoot and experience a recession.
Investor sentiment seems squarely pegged to the shorter-term idea that inflation is slowing and, therefore, rate hikes may be over, which causes investors joy. While this may be true, the victory could be short-lived if rate policy remains too tight for too long. Investors should be vigilant for signs of a possible recession, as many economic indicators are flashing recession signals. The linchpin for a vigilant investor is likely jobless claims at this point.
All the best during Turkey Week!
Disclaimer: Nothing in this discussion should be considered investment advice. The content of this discussion is strictly my personal opinion and subject to change at a moment’s notice. Investment advice can only be provided to you by your investment professional and not by a general market discussion such as this one. If you wish to speak with an investment advisor, contact us. We can probably help.