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Waiting on The Fed (and other things)

it’s a busy week for economic news
 
   
     

Just two days ago, I suggested that we needed to hold our breath and wait for a series of crucial economic reports — CPI, PPI, oil, bonds and the much-anticipated Fed decision on interest rates.

Now that the dust has settled, let's dive into what we've seen and what it might mean for the next stage of the market.

Fed’s Reaction and Interest Rates

Yesterday, the Fed's reaction was a bit cryptic.

They didn’t explicitly say it, but the signals are clear: rates are likely to remain steady for the rest of the year, or there might even be another hike, but definitely not a cut.

This has been well-received by the bond market, as evidenced by the latest 30-year bond auction coming in below the last auction, indicating declining interest rates.

Inflation Reality Check

With the CPI report coming in lower, many are quick to cheer that inflation is slowing down.

But let's be clear — inflation is still climbing, just at a slower pace.

We saw a 3.4% increase over last year, marginally down from 3.5%.

So, while it's not accelerating as quickly, it's still rising. This subtle difference is why we saw the market initially spike on the news, only to pull back shortly after.

Market Performance

In terms of market performance, the Dow has shown continued weakness, being the only index that dipped below its pre-CPI and Fed announcement levels.

On the other hand, the tech sector is buzzing again, spurred by the latest AI developments from AAPL. This has kept the Nasdaq and other tech-heavy indices relatively stable.

Gold and the Dollar

Gold saw a pullback as the dollar gained some ground, but I remain optimistic about its trajectory.

The World Gold Council reported positive inflows into global gold ETFs for the first time in a while, indicating a renewed demand. This could signal a potential rise in gold prices moving forward.

Putting It All Together

So, what’s the takeaway here?

The market is still navigating through a complex landscape of mixed signals.

While inflation isn’t accelerating as quickly, it's still rising, and the Fed seems poised to keep interest rates steady or even consider a hike — even if they haven’t explicitly said it.

The tech sector remains a hot spot, and there's cautious optimism around gold.
As always, stay tuned and trade smart.

I’ll keep an eye on these trends and how they evolve in the coming weeks.


— Geof Smith
P.S. Did you miss Stephen and Nate’s trading challenge? See what they’ve cooked up here.
 
   
 
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