The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Sleepy
The equity market didn’t want to move around much. This is a bit surprising considering what the other influential markets did. The bond market sold off, with yields climbing materially across the curve again. Crude prices climbed across its curve, as the US/Iran situation took a negative turn. The S&P opened slightly lower and meandered about the unchanged level for the session. Capital flow was very light at 80%.
Mid-August trading is supposed to be quiet. Perhaps time of year has a lot to do with the lack of action in US stocks. Perhaps though, investors are keeping their powder dry before we learn July’s CPI (3.4% est & 3.5% prior) and PPI (4.9% est & 5.5% prior) data? CPI prints Wednesday morning and PPI prints Thursday morning.
Those inflation prints, but particularly the CPI print, should kick markets in the pants strongly. The Fed was just about on the fence with respect to hiking and the weak labor data helps back that stance off some but the inflation data is likely to be the deciding factor.
If inflation comes in cool, the Fed will almost certainly leave rates flat. One might even hear arguments pop up for easing. If inflation comes in hot, depending how hot, the Fed will likely hike. Unlike past inflation data, this week’s data seems very much like a branching point. The data will dictate a path for the Fed.
That path will matter tremendously for Treasuries and therefore affect the stock market accordingly.
Wednesday is looking like a binary event. Markets feel priced at the 50/50 right now, so unless we get the information leaked, we’ll probably stay here until the data and the volatility hits.
See you tomorrow.
-Mike
Visdom Market Commentary
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