Market Notebook
Discussion –
PRICE ACTION:
Equity prices, as measured by the ticker SPY, closed higher last week, while bond prices, as measured by the ticker BND, closed lower.
SPY +1.11%
BND -0.19%
TECHNICAL ANALYSIS:
SPY price broke out of consolidation higher and could be considered as establishing a new upward trend.
BND price appears to have established an upward trend.
SENTIMENT:
Sentiment appeared directly tied to the Federal Reserve rate cut as the Federal Reserve Board of Governors delivered a 50 basis point cut last week.
Monetary policy acts with considerable lag, and market participant sentiment is forward-looking. These factors, plus a host of others, result in a current market price that reflects participants’ cumulative best estimate of future asset value, likely up to 18 months in advance, with closer dates more heavily weighted than dates farther out. It is important to remember that market participant sentiment regarding today’s events reflects some possible future, not current conditions, and is subject to revision daily.
ECONOMY AND FUNDAMENTALS:
Throughout the tightening cycle, jobless claims have never indicated a recession by our measure. We will continue to monitor weekly jobless claims closely.
The Conference Board’s 3Ds rule triggered a recession warning as the Leading Economic Index declined last month. As more indicators suggest the possibility of a recession, monitoring weekly jobless claims becomes ever more important.
Market participants should be on the lookout for recessionary conditions following the first rate cut after a tightening cycle. That cut happened last week. To avoid recessionary conditions, the Federal Reserve will have to get the timing and size 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.