Are we over the hump?
Those of you who do not look at X, here is a great summary of today’s FOMC by the Kobeissi Letter:
1. Fed cuts interest rates by 50 bps for first time since 2020
2. Fed sees 2 more 25 basis point rate cuts in 2024
3. One Fed governor (Bowman) dissented for the first time since 2005 in favor of a 25-bps rate cut
4. Fed gained “greater confidence” that inflation is moving to 2%
5. Fed will “carefully assess incoming data” and evolve outlook
6. Fed sees 100 bps of rate cuts in 2025 and 50 bps of cuts in 2026
The long awaited “Fed pivot” has officially begun.
However, not so fast in celebration-
The last 2 times the Fed’s first cut was 50+ bps:
Jan 3, 2001 – S&P 500 fell ~39% next 448 days which led to a recession
Sep 18, 2007 – S&P 500 fell ~54% next 372 days – Unemployment rose another 5.3% – Recession.
Yet, this is so very different than 2001 and 2008.
The tech bubble looks more like a tech correction.
And there is no real estate crash or mortgage debacle.
So, what happens at least for the rest of this week?
Perhaps we get the soft landing.
And perhaps stagflation becomes the newest mantra with a lot more easing on the table-or as I say on media:
Stagflation is a speed bump to recession.
Regardless, Granny Retail XRT continues to have my attention.
I will follow her. Over 80 I am all in on a bull run in equities.
Under 70, I am cautious, if not bearish, in equities.
And Commodities?
We have to watch the dollar to see if 100 holds or not.
Unless there is a significant rally, a bounce from here should not be too impactful.
However, if there is a huge drop under 100, that would reduce Granny’s purchasing power, drive prices higher and give us that stagflation.
For commodities?
We recommend you watch DBC and DBA and forget CPI PPI and PCE.
At this point, DBC (article yesterday) must make up its mind.
But DBA looks about to tackle the 2024 highs.
Both will tell you better than anything else where hard assets are going and in turn, inflation.
Twitter: @marketminute
The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.
