The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
It ain’t gonna be easy.
Dip-buyers and bounce-players couldn’t get a 3rd win today. Futures were down 20 points around midnight but returned to flat once Europe began trading. The bears controlled things from then on. The data and news today weren’t all that revealing and the S&P opened the session -25 points. Prices slipped quickly and by 10 AM, we’d found the trading range for the rest of the day, -75 to -50 points. Yields didn’t do much today and Fed Funds didn’t change much either. There’s 59 bips of cuts priced by year-end now, only a bip different from yesterday.
Today was simply a shift in sentiment. The news was not a factor in any particular sense. Maybe the overall negative tone of the news cycle plays a role in a generally bearish feel of the equity market today but that’s a speculation on my part.
Let’s assume we don’t have a clear why to identify, that explains today’s bearish turn. It just showed up and now we have to deal with it. These things happen in markets. They just haven’t happened much in the last two years and I’m sure some investors forgot that this is part of the normal market environment.
Anyway, sentiment is a dynamic element in the market currently. There’s no longer a sentiment trend that you can hop on and ride with confidence. We are day-to-day. This is going to shake out a lot of people, especially if things get dicey.
Tomorrow the Fed announces the next rate policy decision. The overwhelming consensus is that no changes will be made. The futures market prices a 25 bip cut with less than 1% probability. We are in familiar territory with the Fed tomorrow. They will do nothing and we will torture the statement for hidden meaning. We will over-analyze the word choices of Chairman Powell during the press conference.
The bulls are looking for statements of economic strength and hints of dovishness, allowing the economy to run.
Bears are looking for statements of inflationary concern and hints of dovishness, in an attempt to head off a recession.
We’ll see who’s happy tomorrow afternoon.
See you tomorrow.
-Mike
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