The Morning Call
9/19/24
The
Market
Technical
Wednesday in the
charts.
https://www.zerohedge.com/markets/fed-unleashes-chaos-across-markets-not-crisis-all-50bps-rate-cut
Note: intraday,
the S&P pushed above its all-time high but failed to hold. Follow through.
Rate cuts should
lead to explosive equity price gains.
Will ‘sell the
first rate cut’ work this time?
https://www.zerohedge.com/the-market-ear/100-time-fed-cuts-ath-stocks-always-1-year-later
Fundamental
Headlines
The
Economy
US
Weekly initial jobless claims totaled 219,000
versus forecasts of 230,000.
The September Philadelphia
Fed manufacturing index was reported at 1.7 versus projections of -1.0.
International
Other
Monetary
Policy
The FOMC lowered
the Fed Funds rate by 50 bp. There was, of course, a major area of dispute on
the Street as to whether the cut would be 25 or 50. Most investors will interpret the cut as well
as the dovishly revised ‘dot plot’ as a sign of a much easier Fed policy. But in
his presser, Powell said the reason behind the 50 bp cut was that the Fed had
made good progress lowering inflation but not as much progress as holding unemployment
at a low level. Hence, a slightly heavier emphasis on an easier monetary policy.
However, in other comments his tone more
hawkish. This pattern of a dovish (hawkish) FOMC statement followed by a more
hawkish (dovish) tone in the subsequent Powell presser has become fairly
typical. Sort of a continuation of the Yellen ‘on the one hand, on the other and’
routine.
https://www.calculatedriskblog.com/2024/09/fomc-statement-50bp-rate-cut.html
FOMC economic projections.
https://www.calculatedriskblog.com/2024/09/fomc-projections.html
The Fed’s relative hawkishness.
For those who like
to get in the weeds of economic theory, the article is a decent layman’s
presentation of Modern Monetary Theory. It was eye opening for me primarily
because everything that I have read boiled its principal thesis down to ‘a
government which issues its own currency can print as much of it as necessary
to operate without any major negative consequences.’
The author clarifies this by saying what it really means is that (1)
the government doesn’t need the financial markets to print money [i.e. sell
debt]; it can simply sell that debt to its central bank [and that creates
money] but more importantly (2) that
quantity of money creation [printing] must be offset by taxes in order to avoid
inflation---this principal being ignored by those (mostly politicians and their
sycophants) who just want to print money to pay for what projects are near and
dear to their hearts.
https://www.nakedcapitalism.com/2024/09/why-is-modern-monetary-theory-so-important.html
Fiscal
Policy
Why hasn’t the subject of the budget deficit
come up in the presidential campaign?
Recession
Interest rates are pricing in a recession.
https://www.apolloacademy.com/rates-markets-are-pricing-in-a-recession/
The latest Q3 nowcast.
https://econbrowser.com/archives/2024/09/gdpnow-at-3-for-q3
Strong retail sales pushing the nowcast
higher.
Still no sign of recession.
https://www.capitalspectator.com/defying-recent-recession-warnings-growth-likely-to-prevail-in-q3/
Big four recession indicators.
https://www.advisorperspectives.com/dshort/updates/2024/09/17/the-big-four-recession-indicators
Bottom line
The labor market’s
impact on the stock market.
https://www.advisorperspectives.com/commentaries/2024/09/18/labor-market-impact-stock-market
Does the party in
power have anything to do with the stock market performance?
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