Market Notebook

PRICE ACTION:
Equity prices, as measured by the ticker SPY, closed lower last week, while bond prices, as measured by the ticker BND, closed higher.

SPY    -0.83%
BND    +0.30%

TECHNICAL ANALYSIS:
SPY price appears established in an upward trend, while BND price action suggests wide-ranging consolidation.

SENTIMENT:
Sentiment remains generally positive for equities. The perception of stretched equity valuations, earnings reports, and rate-cut timing appeared to negatively influence equity investor sentiment last week. 

ECONOMY AND FUNDAMENTALS:
Economic indicators within the Market Notebook remain mixed. The 10-year minus 3-month yield curve and the Conference Board’s Leading Economic Index signal caution, while the remaining indicators indicate normal conditions.

Throughout the tightening cycle, jobless claims have never indicated recession by our measure. In fact, jobless claims suggest that “normal” market conditions will likely continue over the short term.

The 12-month trimmed mean PCE is already below the long-term average, meaning that the Federal Reserve is already within a window within which it could cut interest rates at any time.

The first rate cut will likely happen in late 2024 or early 2025. Market participants should be on the lookout for recessionary conditions following the first rate cut after a tightening cycle. To avoid recessionary conditions, the Federal Reserve will have to get the timing of rate cuts exactly correct. Thus far, the Federal Reserve has managed the economic cycle well.

All the best during the week ahead!

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.