The Bad News ❌
- Blame the correction on "SEASONALITY," Historically, September is the worst month of the Year.
- The recent rise in Long Rates is threatening Mortgage demand and Stock earnings (Long duration assets)
- Higher Rates Typically result in increased Bankruptcies.
- Equity Credit Risks are on the Rise.
- New York Manufacturing pukes again, suggesting some parts of the economy are still struggling.
Debunking Equity Credit Risk
- More than 75% of Corporate debt is monetized at a fixed rate; therefore, it is not affected by rate hikes.
- Almost half of Equity debt won't need re-financing until 2030.
- Corporate Profits Margins are virtually unaffected by rate hikes.
The Good News ✅
- The Bull Market Trend is still in place. Technically, $SPY is setting up for a reversal as it nears over-sold territory, approaching S-3. The same goes for Nasdaq, & most equal-weighted averages.
WHAT KEEPS THIS BULL MARKET GOING???
- The Market is pricing in a pause, expecting the FED to Skip the September rate hike. The market can catch a big from here If Fed commentary aligns with a hold on rates. A surprise hike would become a tailwind.
Volatility has pretty much peaked & showing bearish divergence. The VIX can reverse in the next couple weeks if there are no more surprises.
- The Dollar remains " THE WRECKING BALL." However, it's still in a downtrend so we can expect a reversal based on downtrend-resistance & overbought signals.
- In March of 2020, Bitcoin bottomed at 4k following an extremely oversold signal on the daily chart. Three years later (2023), Bitcoin reached that level again at 25k. Where's the ETF?
U.S. Economy 🚀
- GDP is the mothers' milk to the economy, and currently, growth forecasts are rising, led by consumer spending. As GDP rises, we can expect Q3 earnings to rise.
- Philly Fed Man sees first positive reading in 12 months.
- The rebound in U.S. Retail Sales is reflecting the expanding economy.
CAN THE FED CUT SOONER THANEXPECTED?
Fed Policy
- FOMC Minute Key Takeaways
FOMC Minutes Review | Aug 16th 2023
A collection of key points and excerpts from the Federal Open Market Committee (FOMC) minutes discussing the Federal Reserve's stance on interest rates, inflation, and the overall economic situation.
Are 2023 Rate Cuts Possible without Recession?
- Minus Shelter CPI collapsed.
- Shelter Prices Are Lagging Real-Time rents.