August 17, 2024 | Daily JAM |
I expect cash flows to favor a continued recovery rally. One thing that happens in financial markets when central banks get set for a major change in policy direction is that cash flows from re-positioning of speculative and trend-following strategies can drive big moves in market volatility. And that’s exactly what we’re seeing now. Besides the unwinding of yen carry positions that led to selling of dollar-denominated assets, the two-week sell off that ended last week saw the biggest unwind in U.S. equities since the Covid-19 panic. And now this unwind looks to be over, Which means this cash will be going back to work in U.S. stocks. The action is taking place in trend-following quant funds.
August 16, 2024 | Daily JAM |
U.S. consumer sentiment rose in early August for the first time in five months as consumers raised expectations on their finances and on subsiding inflation. The University of Michigan sentiment index climbed to 67.8 from 66.4 in July, according to the preliminary August reading. The median estimate in a Bloomberg survey of economists called for 66.9.
August 16, 2024 | Daily JAM, Morning Briefing, Short Term |
What happened to all that selling? And the conviction that the U.S. economy ws headed for a recession? The Standard & Poor’s 500 finished Thursday, August 15, with another up day for a 6-day rally that has pushed the index up 6.6%.Treasury yields surged with the yield on the 2-year Treasury, the maturity most sensitive to shifts in sentiment about the direction of Federal Reserve interest rate policy, climbing back above 4%. The S&P 500 climbed 1.6% on the day. The Nasdaq 100 added 2.5%. The small-cap Russell 2000 gained2.5%. The CBOE Volatility Index, Wall Street’s “fear gauge,”the VIX, dropped back to near 15, below its long-term average, and hugely below its August 5 close at 38.57. The proximate cause of the rebound rally? Three reports showing that the U.S.consumer is alive, well, and still buying stuff.
August 14, 2024 | Daily JAM, Mid Term, Morning Briefing |
Core CPI inflation rose at a 3.2% annual rate in July. That was the slowest rate of increase since early 2021.And that rate of increase was low enough to keep the Federal Reserve on track for cutting interest rates at its September 18 meeting.
August 14, 2024 | Daily JAM, Mid Term |
A plunge in new corporate borrowing in China combined with Chinese households preferring to repay debt rather than expand borrowing saw bank loans in China shrink last month for the first time since July 2005. That deepened China’s years-long battle with weak credit demand, as a property slump spurs caution on buying homes and expanding investment. This has raised fears that China’s first bank loan contraction in nearly two decades could send the world’s No. 2 economy toward a “balance sheet recession” similar to that in Japan decades ago.
August 14, 2024 | Daily JAM |
Economic models from Goldman Sachs and JPMorgan Chase show that higher odds of an economic downturn have risen materially, judging by signals in the U.S. bond market and to a lesser extent the performance of stocks that are acutely sensitive to the ebbs and flows of the business cycle.
August 12, 2024 | Daily JAM, Mid Term |
Profit growth at the Magnificent 7–Apple, Microsoft, Alphabet, Amazon, Meta, Tesla, and Nvidia-—still raced ahead of the rest of the S&P 500 in the second quarter, But for the first time in five quarters, the rest of the S&P 500–the S&P 493 if you will–showed positive year-over-year growth in profits.
August 11, 2024 | Daily JAM, Morning Briefing |
Expect a final inflation test before the Federal Reserve meets on September 18. Unless there’s a huge surprise in the Wednesday, August 14, CPI report, the Fed will cut interest rates for the first time at that meeting.
August 8, 2024 | Daily JAM, Morning Briefing |
The number of Americans filing initial claims for unemployment benefits fell more than expected last week. Initial claims fell 17,000 to a seasonally adjusted 233,000 for the week ended August 3, the Labor Department said today, August 8. That was the largest drop in 11 months. Economists polled by Reuters had forecast 240,000 claims for the latest week. The data calmed fears on an impending recession raised by last Friday’s unexpectedly weak jobs report for July.
August 8, 2024 | Daily JAM, Short Term |
I’d worry less about the U.S. slipping into recession if the rest of the global economy wasn’t so challenged on growth. For the first quarter of 2024, the annual growth rate in the European Unpin was just 0.6%, for example. And now we have data out of China showing that export growth unexpectedly slowed in July. That signals cooling global demand at a moment when China needs export growth to make up for a sluggish domestic economy. Exports rose 7% in July in dollar terms from a year earlier, falling short of economists’ median forecast of a 9.5% gain.
August 7, 2024 | Daily JAM, Morning Briefing, Short Term |
The options market is implying the S&P 500 Index will move 1.2% in either direction that morning on the report on U.S. initial and continuing claims for unemployment.
August 6, 2024 | Daily JAM, Short Term |
Briefly on Monday’s scary stock market volatility, traders and investors decided that the Federal Reserve would make its first interest rate cut at its September 18 meeting not a “business-as-usual” 25 basis points but a “market emergency” 50 basis points. On the CME FedWatch tool the odds of a 50 basis point cut jumped to 85% from just 13.2% on July 30
