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“To hell with facts! We need stories!” – Ken Kesey
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
The long-awaited Fed decision day has arrived, and despite an Atlanta Fed GDPNow forecast for growth of 3.4% in Q3, stronger-than-expected retail sales in August, still relatively low (but admittedly rising jobless claims), and higher-than-normal inflation, the Fed will likely cut rates this afternoon. That’s not to say there is no justification for a rate cut. Continuing jobless claims remain elevated, job growth has practically evaporated, and both the manufacturing sector of the economy and housing remain weak. Additionally, other secondary indicators, such as heavy truck sales, have been particularly weak. There are very few people who would say that the Fed should not be cutting rates today, but given how fast sentiment towards rate cuts has shifted, it’s hard to argue that the President using the bully pulpit of the White House hasn’t at least played in role in shifting the conversation.
Heading into today’s session, equity futures are modestly negative along with treasury yields, crude oil, gold, and crypto. Housing Starts and Building Permits were also just released, and both reports missed expectations by a relatively wide margin, providing more justification for a cut today.
Overnight in Asia and this morning in Europe, equity markets had mixed returns. CPI in the Eurozone came in lower than expected, while it was hotter than expected in the UK. On a y/y basis, CPI for the Eurozone came in slightly lower than expected at 2.0% compared to forecasts for 2.1%.
As we head into this afternoon’s expected rate cut from the Federal Reserve, US stocks have been in rally mode, but they’re not alone, at least from the perspective of a US investor. The snapshot below from our Trend Analyzer shows where various global ETFs closed yesterday relative to their short-term trading ranges. The S&P 500, as measured by the SPDR S&P 500 ETF (SPY) is up 1.5% over the last five trading days and closed yesterday in ‘extreme’ overbought territory (more than 2 standard deviations above its 50-DMA), but it’s not the only one and certainly not the best performer. Of the ETFs shown in the spotlight, three have outperformed the US over the last week, and SPY is the worst performer on a YTD basis.
A look at one-year price charts of all six ETFs shows that they’re all either at or right near 52-week highs heading into today’s session. The only difference is the slope of their advances heading into those highs. The MSCI Emerging Markets ETF (EEM) and the Latin America 40 ETF (ILF) have been moving almost vertically over the last couple of weeks, while the FTSE Europe ETF (VGK) has been moving in more of a sideways range.
