Market Notebook
Discussion –
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 +0.02%
BND -0.75%
TECHNICAL ANALYSIS:
SPY price appears established in a medium-term upward trend. The recent pullback in price signals that a transition to a corrective pattern is possible. SPY should be considered to be in a consolidation or corrective pattern until SPY price exceeds the July 16th high.
The recent BND price breakout above the 2024 highs suggests a possible transition to an upward trend.
SENTIMENT:
Equity sentiment quickly turned positive as traders digested the news surrounding the unwinding of the Yen carry trade from the week prior.
ECONOMY AND FUNDAMENTALS:
Throughout the tightening cycle, jobless claims have never indicated a recession by our measure. A recession is very difficult to have unless jobless claims roll over. We will continue to closely monitor weekly jobless claims for signs of economic stress.
The 12-month trimmed mean PCE is 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 over the next few months. 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; however, evidence is building that they are behind the curve and need to change policy soon.
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.