The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Lazy river
Markets rolled along without drama nor excitement today. Headlines cooperated on that front too. S&P futures dipped some overnight but while the index opened down about 30 points, it quickly recovered to flat and basically stayed there for the remainder of the session. The index did leak a little value in the final half hour. The yield curve steepened a bit, which didn’t help equities. The Dollar strengthened a bit. Precious metals and Bitcoin bounced notably. For the first day of July, it was fittingly smooth sailing.
The sleepy start to the month and new quarter isn’t noteworthy. Summer is usually a bit calmer and we should expect an uptick in unremarkable days. While seasonality could explain some tranquility, investors might just be waiting for tomorrow’s nonfarm payrolls data (+115k est vs +172k prior) before they make significant moves. After all, there’s a new Fed Chair at the helm and the next FOMC decision is at the end of the month, July 29.
The hawkish vibes of the June FOMC meeting continue to affect markets, especially fixed income and rates markets. Fed Funds futures price in 36 bips of hiking over the rest of the year and the yield curve is higher than just before the meeting. How the nonfarm payrolls data might influence the Fed is a major question on the Street. For bonds and rates, it’s the big kahula topic. For unclear reasons, equities are less preoccupied. That said, if the bond market reacts in a huge way, stocks will be forced to react accordingly.
Anyway, the point is that tomorrow delivers extremely important data to markets and its probable that big pools of capital are waiting on that data before going into, or out of, their silos. Considering too, that Friday is a US holiday, it would make sense for investors to hold off on trading today, and save their efforts for right-sizing their positions as we head into the long weekend tomorrow.
I’m not predicting that tomorrow *must* be a volatile holy-mackerel type of day, though it certainly could. I’m just saying that a quiet trading day before significant macro data and a long weekend passes the common-sense test of the moment.
See you tomorrow.
-Mike
Visdom Market Commentary
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