Everyone, Everywhere About to Become an Interest Rate and Money Market Expert...We have a very long week ahead of us... so get some coffee... and hold it together.
Good morning: It’s September 15… and that triple whammy on the money markets… Hasn’t shown up just yet… Corporate taxes, end-of-quarter payments, rotation… That said, gold is experiencing its strongest run since 1979, surpassing even the pre-Great Financial Crisis era. Bond yields continue to fall, and the December futures on the S&P 500 are pushing back above 6,650. That’s a new 52-week high… As I’ve explained repeatedly… the wave of capital globally remains strong. It has remained so since we saw policy accommodations shift post-April, and the so-called tightening efforts of central banks around the globe have been more supportive. The question of whether the U.S. will see any significant tightness in the banking sector remains. We must keep an eye on banking reserves, although we know that the traditional banking sector has taken a backseat to capital creation from shadow banks (hedge funds and private equity) in the last few years. Inflation remains very sticky – especially at the services level. Now that I’ve bought a home, I expect the guy who wants to cut the grass to increase his prices with a new customer… That and everything else that requires human capital. Services inflation hit 3.8% - and that remains a serious challenge for the Federal Reserve… One they’re willing to ignore. The Fed is now planning to cut interest rates in the face of sticky inflation. This is why I continue to argue that the Fed likely abandoned its 2% inflation target (unofficially). I’m sure we’ll find out about this in 2035… just like it took 17-18 years for Americans to realize that the Fed started “inflation targeting” in the 1990s. The Five Big Sstories This Week…The Fed's Trapped (Wednesday 2 PM)… The Fed cuts rates on Wednesday. Everyone expects 0.25%. However, here's the problem - they're cutting into inflation that's still above target, while the labor market is struggling. Jerome Powell has to thread an impossible needle. He needs to sound dovish enough to support markets but hawkish enough to keep inflation expectations anchored. One wrong word and markets swing 3% in minutes. If he hints at pausing cuts, stocks crater. If he promises too many cuts, the dollar will tank, and inflation will roar back. President Trump is hoping for a “Big Cut” from the Fed this week. While that may help support the labor market in the future, the question is how much inflation will impact the employment markets moving forward. How will companies try to do more with less… Is this the start of a greater adoption of technologies like AI to reduce wage inflation, while reducing headcount? These are all things that must be addressed and considered… For now, I’m just trying to wake up and start my day. I’ll be over at TheoTrade at 8:45 ET for my daily show, Market Masters. We’ll discuss the full week ahead and what you can anticipate… It’s free, live… and MORE!!! What else is on tap this week? Let’s explore the opportunities…... Continue reading this post for free in the Substack app
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