The State of Markets: ‘Surprise Fed Cut – What Next?’
Last week the Fed surprised markets with a 50bps rate cut (vs. expectations of 25bps). Price action so far has been encouraging for the bulls. Key barometers of liquidity, for example, have performed well (e.g. gold, silver, & Bitcoin); credit and sovereign bond spreads have tightened sharply; and the equity market was strong (on Thursday). In particular, both the NASDAQ1o0 and the Philly SOX broke above their key pennant patterns, while the S&P500 closed at new record highs. Of interest, the move higher in the S&P500 was most impressive on an equally weighted basis (see key chart below).
The key question, therefore, is: What’s next? Is that ‘initial move’ higher in equities the ‘right one’? Or – have markets become complacently priced/positioned in the near term? And, while the equally weighted index makes new highs, key tech/leadership stocks have been struggling (e.g. see Nvidia). Is this market therefore, once again, trying to rotate? Please see Longview research for detailed analysis of those questions.
Macro data and events this coming week will be watched closely, and include speeches from various FOMC members who will be looking to fine tune Powell’s message from Wednesday. Those speakers include Kashkari, Bostic, and Goolsbee (as well as Powell). Elsewhere there will be September flash PMI estimates (on Monday, for the US/several economies); US new home sales (Wednesday); and US PCE inflation (& personal income and spending, on Friday). Please see below for a full list of key data and events this coming week.
Key chart: Equally weighted S&P500 index, with its 50 & 200 day moving averages
Upcoming important data/events this week:
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Events: |
RBA policy decision (Tues, 5:30am); Riksbank policy decision (Wed, 8:30am); SNB policy decision (Thurs, 8:30am). |
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Monday: |
Flash PMIs for manufacturing & service sector for France (8:15am), Germany (8:30am), Eurozone (9am), UK (9:30am) & US (2:45pm) – all September first estimates. |
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Tuesday: |
Japanese Jibun Bank manufacturing & service sector PMIs (September first estimates, 1:30am); German IFO business climate (Sept, 9am); US Conference Board consumer confidence (Sept, 3pm). |
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Wednesday: |
US new home sales (Aug, 3pm). |
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Thursday: |
Eurozone M3 money supply (Aug, 9am); US durable goods orders (August first estimate, 1:30pm). |
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Friday: |
US personal income & spending including headline & core PCE (Aug, 1:30pm). |
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Key earnings: |
AutoZone (Tues); Micron, Cintas, Paychex (Wed); Costco, Accenture (Thurs). |
Key Research
The SHORT VIEW (& market positioning), 17th September 2024:
“GOLD: SELL Case Brewing”
Gold is doing its ‘usual’ job as a key barometer of liquidity.
That is, given growing signs of weakness in the US economy, various key asset prices have priced in looser Fed policy. Gold has therefore performed well, closing at new record highs in recent trading sessions. Having broken out of a multi-year sideways trading range in early March (FIG A), the uptrend therefore appears to be strong (and ongoing).
Key North American macro data & events
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Events: |
Speeches by the Fed’s Bostic on the Economic outlook (Mon, 1pm), Goolsbee in Fireside chat (Mon, 3:15pm), Kashkari in Q&A on childcare (Mon, 6pm), Colins & Kugler in Fireside Chat (Thurs, 2:10pm), Powell, Williams & Barr at the 10th annual US Treasury Market conference (Thurs, 2:20pm-3:30pm), Kashkari hosts Fireside Chat (Thurs, 6pm) & Collins and Kugler at Fitchburg (Fri, 2:30pm). |
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Monday: |
US S&P manufacturing & service sector PMIs (September first estimates, 2:45pm). |
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Tuesday: |
US Philadelphia Fed service sector activity (Sept, 1:30pm); US FHFA house price index (Sept, 1:30pm); US S&P/Case-Shiller 20-city & national house prices (Jul, 2pm); US Conference Board consumer confidence (Sept, 3pm); US Richmond Fed manufacturing (Sept, 3pm). |
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Wednesday: |
US new home sales (Aug, 3pm). |
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Thursday: |
Canadian employment change (Jul, 1:30pm); US GDP (Q2 third estimate, 1:30pm); US durable goods orders (August first estimate, 1:30pm); US weekly jobless claims (1:30pm); US pending home sales (Aug, 3pm); US Kansas City Fed manufacturing activity (Sept, 4pm). |
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Friday: |
Canadian GDP (Jul, 1:30pm); US personal income & spending including headline & core PCE (Aug, 1:30pm); US Michigan sentiment (September final estiamte, 3pm); US Kansas City Fed service sector activity (Sept, 4pm). |
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Key earnings: |
AutoZone (Tues); Micron, Cintas, Paychex (Wed); Costco, Accenture (Thurs). |
Fig B: US Conference Board consumer confidence (index)
Key European macro data & events
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Events: |
Riksbank policy decision (Wed, 8:30am); SNB policy decision (Thurs, 8:30am); speeches by the ECB’s Cipollone in EU parliament about the digital Euro (Mon, 2pm), Muller at press conference on Estonian central bank's new economic forecasts (Tues, 9am), Nagel on the German economy in Frankfurt (Tues, 5pm), Lagarde at New Frontiers in Macroprudential Policy conference (Thurs, 2:30pm), Rehn at New Frontiers in Macroprudential Policy conference (Fri, 8:15am), Lane & Nagel at fiscal policy, financial sector policy and economic growth conference (Fri, 9:15am & 12:15pm) & Cipollone in Vienna (Fri, 10:40am). |
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Monday: |
HCOB manufacturing & service sector PMIs for France (8:15am), Germany (8:30am) & Eurozone (9am) – all September first estimates. |
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Tuesday: |
German IFO business climate (Sept, 9am). |
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Wednesday: |
French INSEE consumer confidence (Sept, 7:45am). |
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Thursday: |
German GfK consumer confidence (Oct, 7am); Italian ISTAT consumer confidence (Sept, 9am); Eurozone M3 money supply (Aug, 9am). |
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Friday: |
French consumer spending (Aug, 7:45am); French headline CPI & PPI (September first estimate, 7:45am); German unemployment change (Sept, 8:55am); ECB 1 & 3 year inflation expectations (Aug, 9am); Italian industrial sales (Jul, 9am); Eurozone consumer confidence (September final estimate, 10am); Italian PPI (Aug, 10am). |
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Key earnings: |
N/A |
Fig C: Eurozone M3 money supply (Y-o-Y %)
Key UK macro data & events
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Events: |
N/A |
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Monday: |
S&P manufacturing & service sector PMIs (September first estimates, 9:30am); CBI industrial trends orders (Sept, 11am). |
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Tuesday: |
N/A |
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Wednesday: |
N/A |
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Thursday: |
N/A |
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Friday: |
CBI distributive trades survey (Sept, 11am). |
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Key earnings: |
N/A |
Fig D: UK S&P manufacturing & service sector PMIs
Key Asia-Pacific macro data & events
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Events: |
RBA policy decision (Tues, 5:30am); BOJ minutes from July policy meeting (Thurs, 12:50am); RBA publishes financial stability review (Thurs, 2:30am); market holiday in Japan on account of Autumn Equinox (Mon). |
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Monday: |
Australian Judo Bank manufacturing & service sector PMIs (September first estimates, 12am). |
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Tuesday: |
Japanese Jibun Bank manufacturing & service sector PMIs (September first estimates, 1:30am). |
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Wednesday: |
Japanese PPI services (Aug, 12:50am); Australian CPI (Aug, 2:30am). |
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Thursday: |
Australian job vacancies (Aug, 2:30am); Japanese machine tool orders (August final estimate, 7am). |
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Friday: |
Chinese industrial profits (Aug, 2:30am); Japanese ESRI leading index (July final estimate, 6am). |
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Key earnings: |
N/A |
Fig E: Japanese Jibun Bank manufacturing & service sector PMIs
Last week:
Longview on Friday, 20th September 2024:
“US economy – Rapid Re-acceleration?”
Quarterly Asset Allocation No. 59, 20th September 2024:
“US Recession Risk (relatively) Low”
The SHORT VIEW (& market positioning), 17th September 2024:
“GOLD: SELL Case Brewing”
Prior week:
Longview on Friday, 13th September 2024:
“How Strong is the US Consumer”
Quarterly Asset Allocation No. 59, 12th September 2024:
“China: Turning Japanese”
The SHORT VIEW (& market positioning), 10th September 2024:
“OIL: BUY Case Brewing”