The markets closed quite strong last week and were approaching all-time highs again for the S&P 500. The most recent Presidential debate shifted the odds markets, as Harris became a 55-45 favorite on the betting site PredictIt and a very slight favorite on Polymarket. It is positive for the risk markets which did not pull back with Harris gaining strength.
I have received a lot of blowback from my recommendation that the Federal Reserve (Fed) drop the Fed Runds Rate by 150 basis points (bps) over the next several weeks. Certainly, the data has come in stronger than I (and many others) have anticipated. Particularly surprising was the drop in jobless claims, now nearer to the midpoint of my 200k to 240k range after breaching the upper limit.
Last Monday morning, I tried to shake up the conversation about how far behind the curve the Federal Reserve (Fed) is currently by suggesting an inter-meeting 75 basis points (bps) cut and another 75 bps cut in September.
Never before in my history studying the Federal Reserve (Fed) has the Fed’s policy come into question immediately following the Fed decision.
The economic data is coming in very good for markets. Starting with GDP, we observed a modest growth rate of around 2% in the first half of the year. While not spectacular, it’s far from recessionary conditions. This level of growth, with slight inventory accumulation, suggests a stable economic backdrop.
This week's commentary reflects a mixture of political, economic, and technical challenges facing investors. Let’s begin with the political landscape which continues to heavily influence sentiment.
The assassination attempt against former President Trump gave a bump to his odds of becoming president, as they rose from 60% to 67% on Monday morning on Predictit.org.
The employment report from last Friday, in my view, was weak. Although the headline number came in slightly above expectations, the composition was troublesome, with more than 110k jobs subtracted from the last two months and private sector jobs lagging.
The presidential debate was the big story of the week and revealed a mild market preference for former President Trump. Notably, during the 90 minutes of the debate when there was no other market news, S&P 500 Futures rose 10 points, due to Trump’s business-friendly policies despite his higher-policy unpredictability.
Recent economic data slightly underperformed expectations, though nothing dramatically concerning. Jobless claims dipped just below the 240K level, which is something to watch closely. Claims above this threshold have historically been indicative of labor market weakness, which could influence Federal Reserve (Fed) policies.
Last week’s inflation data was very encouraging, with key indices like the Consumer Price Index and the Producer Price Index coming in below expectations. Stay up to date with the latest commentary from Professor Siegel.
There was a significant reaction in the bond market to the latest job growth figures, which exceeded expectations. The positive surprise led to a sharp 10 basis point rise in long bond yields. Interestingly, equity markets remained resilient in the face of this increase, suggesting a collective market relief that we are not heading toward a slowdown or recession.
The story that captured all media attention last week was Donald Trump’s guilty verdict. But the Trump conviction had no effect on the markets or predicted probabilities in betting markets for him becoming president.
Economic reports from the past week provided reassurance following the previous week's disappointments. Stay up to date on the current conditions with the latest commentary from Professor Siegel.
Despite the overall positive response from the markets last week, the data presented its share of ups and downs. Stay up to date on the varied indicators with the latest commentary from Professor Siegel.
Last week was quiet on the economic and data front. The one high frequency data indicator we did receive was jobless claims, which ticked up after a dull stretch of near constancy. The jobless claims figure came in at 231,000, which is at the higher end of my preferred range of 200-240k.
The markets rightly experienced a significant relief last week. Stay up to date on last week’s Fed meeting with the latest commentary from Professor Siegel.
Attention-grabbing performances from the likes of Microsoft, Google, and Tesla swayed market sentiments back to growth.
For the past 15 years, Bob Huebscher has been privileged to interview Jeremy Siegel, the Russell E. Palmer Emeritus Professor of Finance at the Wharton School, about his outlook for the economy and the markets. This year, for the first time, Bob will interview Jeremy live.
