July 26, 2023 | Daily JAM, Morning Briefing |
The Federal Reserve raised its benchmark short-term interest rate 25 basis points to 5.25% to 5.50%. The central bank said that further interest rates are likely, but that the timing of any rate increases was contingent on data showing how the economy is reacting to interest rate increases so far. Fed Chair Jerome Powell made it clear that there is more work ahead to bring in inflation down to the Fed’s target of 2%. But he also made it clear that the timing of any future moves will depend on of data over the coming weeks and months. “We think we need to stay on task,” Powell said
July 24, 2023 | Daily JAM, Morning Briefing |
Ho, hum, it’s a quiet week with nothing much going on. Oh, except for the meeting the Federal Reserve’s interest-rate setting Open Market Committee on Wednesday, July 26. Oh, and earnings from Microsoft (MSFT) and Alphabet (GOOG) on July 25, and Meta Platform (META aka Facebook) on July 26. Apple (AAPL) and Amazon (AMZN report on August 3.
July 13, 2023 | Daily JAM, Videos |
Today’s video is Remember the Quiet Period. Don’t panic. There have been a lot of announcements coming from the Fed recently but it’s not because there’s a new crisis or a huge event brewing. It’s simply that the window of time when the Fed can speak is about to close. The Fed has to go quiet twelve days before the July meeting, so right now, they’re trying to make it very clear to the market that a 25 basis point raise is likely in July. On Monday, three Fed officials, Michael Barr, Mary Daly and Loretta Mester discussed the need for another rate hike–possibly two. We’ll be entering the Fed’s quiet period on Saturday, July 15. Looking at the CME FedWatch, on July 11, the market believed there was a 92.4% chance we’ll get a rate hike on July 26. On the same date, the market thought the odds were only at 22.2% for a 25 basis point increase at the meeting on September 20. It sounds like the Fed has made their intentions clear for the July 26 meeting, and the market won’t be shocked by a rate hike on that date. September 20? Hmmm.
July 13, 2023 | Daily JAM, Morning Briefing |
Yesterday, the Bureau of Labor Statistics reported that all-items inflation rose at just a 3% annual rate in June. That was a huge drop from the 4% annual rate reported in May. The inflation numbers immediately prompted Wall Street to, again, declare that the Federal Reserve’s cycle of interest rate increases would end “soon.” “Soon” is now defined as after the Fed’s July 26 meeting. Fed officials have been so adamant in recent days about the need for more interest rate increases that the odds of 25 basis point increase at the July 26 meeting barely budged after the June CPI report. Today the CME FedWatch Took, which calculates the odds of a Fed move by looking at prices in the Fed Funds Futures market (and is, thus, a measure of investor sentiment rather than speculation on Fed thinking) puts the odds of a July 26 25 basis point increase at 92.4%. That’s down only slightly from the 94.2% odds before the CPI inflation report. The big move has been in the odds for a second 25 basis point increase at the Fed’s September 20 meeting. Today, the odds are just 11.1%. That’s down from 13.2% odds of a 25 basis point move in September on July 12. And down big from 27.5% odds of another interest rate increase in September on July 6. And there’s the Fed’s problem.
July 9, 2023 | Daily JAM, Morning Briefing |
Look for big news on inflation and earnings this week. But I think the news is baked into stock prices so I don’t expect much of a move on the news.
July 6, 2023 | Daily JAM, Morning Briefing |
Earlier this week economists were projecting the official government jobs report due on Friday, that is tomorrow, would show that the U.S. economy added just 200,000 jobs in June. This morning, however, the ADP Research Institute’s survey of private employers showed the economy added 497,000 jobs in June. That’s more than twice the 220,000 gain that economists had projected for this report. And way above the 267,000 jobs reported by this survey in May.
June 29, 2023 | Daily JAM, Morning Briefing, Short Term |
This morning all the way in New York I could hear the gnashing of teeth from Jerome Powell’s office at the Federal Reserve. “What do we have to do to slow consumer spending in the Untied States?” he cried after this morning’s economic data. Today the Commerce Department sharply raised its judgement on first quarter GDP growth. The last revision to the data showed the U.S. economy growing at a 2% annual rate from January through March. That was a huge step up from the 1.3% growth repoRrted in the previous GDP estimate.
June 28, 2023 | Daily JAM, Short Term |
Investors and traders have been riding a Goldilocks market that has rested on a belief that all news is good news. There are signs that belief is facing challenges that might, just might, lead to a replacement of Goldilocks with some other narrative. Right now, the golden child is still resting peacefully at the Three Bears’ house with a stomach full of “just right” porridge, but sentiment in the last week has at least been willing to countenance the possibility that some bad news is bad news. And, I can see a lurking suspicion in the market that may be in the weeks to come all news if bad news.
June 14, 2023 | Daily JAM, Morning Briefing |
As expected, the Federal Reserve’s Open Market Committee held the central bank’s benchmark interest rate steady today at 5.0% to 5.25%. But the Fed in its meeting press release and Fed chair Jerome Powell’s press conference stressed that its inflation fight isn’t over. That the market could see another interest rate increase at the July 26 meeting. And that the market should not expect a pivot to interest rate cuts anytime soon.
June 10, 2023 | Daily JAM |
This week brings potentially market-moving doses of news on inflation and interest rates. First up, inflation. On Tuesday, June 13, the market will get the report on CPI (Consumer Price Index) inflation for May. Economists project that, because of falling gasoline prices in the month, all-items headline CPI will show just a 0.2% increase in month-to-month inflation in May and just a 4.1% year-over-year inflation rate. That would be the lowest annual inflation rate since March 2021. The core rate, however, is expected to climb at an annual 5.3%. And then on Wednesday, the Fed meets on interest rates.
June 8, 2023 | Daily JAM, Morning Briefing |
A flood of Treasury bill, note, and bond sales will drive yields over the next few months as the U.S. Treasury rebuilds a cash account drawn down to the splinters at the bottom of the barrel during the debt ceiling crisis. On Tuesday, the U.S. Treasury clarified the schedule for auctions designed to refill those coffers. The timing, in my opinion, points to a July peak in Treasury yields. (And don’t forget that the Federal Reserve meets on July 26. Today, June 8, the financial markets are saying that there’s a 75.8% chance of either 25 or 50 basis points of interest rate increases at the conclusion of that meeting (some combination of rate increases at the June 14 and July 26 meetings) with odds at 49.9% of just 25 basis points of increased to the Fed’s benchmark rate, now at 5.00% to 5.25%, as a result of the two meetings. I’ve suggested buying the 2-year Treasury on that July peak.
June 5, 2023 | Daily JAM, Videos |
Today’s Quick Pick is 2 Year Treasuries. Ten-year Treasuries with a 5% yield may still be a long way out, but Two-year Treasuries now have a yield of 4.5%. Rates may continue to go up in the short-term and the Fed is likely going to raise interest rates again in June or July, but this is a good place to start a position in these Treasuries. You can, of course, get a CD with a 5% yield, but the CD won’t earn you capital appreciation. If rates go down when the Fed stops raising rates, treasury yields may go down, but the bond may go up. We’ll likely see a peak in rates in the third quarter, so at the moment, I think Two-year Treasuries are a good buy.
