U.S. Equity Markets ultimately closed slightly firmer on month/quarter end with the S&P leading the gains following a volatile trading session that witnessed plenty of two-way price action. The majority of sectors closed green with outperformance in Energy, Communication Services, and Real Estate, while Materials, Consumer Discretionary and Staples underperformed. The highlight of the session was Fed Chair Powell, who hinted at a return to 25bp rate cuts after the 50bp move in September. The Fed Chair said the Fed is not in a rush to cut rates quickly, adding that if the economy evolves as expected, that will mean two rate cuts by year-end for a total of 50bps, implying 25bp in November and December. The downplaying of another 50bp cut saw Stocks and Bonds tumble while the Dollar rallied. T-notes settled around lows but stocks managed to claw back the Powell-induced weakness, likely on month-quarter end rebalancing ahead of the close. In FX, the Dollar was bid post-Powell, taking cyclical currencies (NZD, AUD, GBP) off their highs while the Japanese Yen and Swiss Franc saw further weakness. Meanwhile, the Euro was softer vs the Dollar after a cool German inflation report ahead of the Euro-Zone CPI this morning, adding to the string of soft inflation reports out of Spain and France on Friday. Crude prices ultimately settled flat despite geopolitical escalation with a ground invasion from Israel into Lebanon seemingly imminent while it was confirmed over the weekend that Hezbollah leader Nasrallah was killed in the recent strikes. However, despite geopolitical escalation Libyan oil is expected to come back online, offsetting some of the geopolitical risk premium Crude, while Russia’s Deputy Prime Minister Novak suggested that Middle Eastern geopolitical risk is already priced in. Fed Chair Powell largely reiterated his remarks from the September FOMC Press Conference in prepared remarks to the NABE. However, in his interview, he stated that the Fed is not in a rush to cut rates quickly and that if the economy evolves as expected, that will mean two more cuts this year, for a total of 50bps – implying a 25bp rate cut in September and December, leaning back against expectations for another 50bp rate cut. Elsewhere, Powell said that revisions of GDI removed a downside risk that the Fed was considering. He added that upward revisions of Personal Income also removed a possible downside risk, while the savings rate revisions suggest spending can continue at a healthy level. The Fed Chair said he is watching productivity closely, but it is too early to say if the recent improvements will be sustained. On the labour market, he said the level of job creation may not be quite at the point to keep the unemployment rate level in light of rising supply. He also repeated that the labour market is still solid, but it “really has cooled”, and he does not think the labour market needs to cool further to lower inflation. In an exclusive Reuters interview, Atlanta Fed President Bostic said that he is open to another 50bp rate cut if the labour market shows an unexpected weakness. His baseline case is for an ‘orderly’ easing with inflation expected to continue slowing and the job market to hold up. He does not want to get overconfident on inflation given core PCE remains at 2.7%. However, the recent data does show that disinflation is still on track. Bostic added he will be watching upcoming jobs data closely, noting if employment growth slows much below 100,000 jobs, it would warrant closer questioning of what is happening, but he added that business contacts continue to note they do not expect layoffs. Regarding the Dot Plots, Bostic stated he pencilled in just a single further 25bp rate cut this year, beyond the 50bps in September. Meanwhile, his baseline outlook through the end of 2025 would see a policy rate between 3.00-3.25% (vs Fed median of 3.4%), a level that he believes would have a neutral impact on the economy (vs Fed median of 2.9%). Finally, in an interview with FBN, the Chicago Fed President said the Fed is cutting rates because the economy has normalised. He noted the job market is in a steady state and sustainable. Goolsbee sees ‘cautionary’ indicators on the job market, stressing the Fed cannot wait for the job market to weaken before acting. He noted the most important thing about rate cuts is the process of easing, and there will be a lot of rate cuts. Goolsbee acknowledged that inflation is coming close to their target, while the case for cutting rates has been clear and has nothing to do with politics. Goolsbee also said he was worried about the possible continued port shutdown. Elsewhere, Oil closed flat while Gold finally saw some profit-taking closing lower by 0.9%.
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For anyone following my Platinum Service it made 40 points yesterday, ending September with a gain of 4402 points having ended August with a loss of 301 points after closing July with a gain of 1918 points while June closed with a gain of 2074 points, having made 1843 points in May. The Platinum Service made 4010 points in April after ending March with a gain of 2113 points. February closed with a gain of 1606 points, after closing January with a gain of 3675 points. December saw a gain of 1890 points after finishing November with a gain of 1734 points. October ended with a gain of 3184 after closing September with a small gain of 228 points, after finishing August with a gain of 1485 points, following a small gain of 285 points gain in July, after closing June with a gain of 2683 points. May closed with a gain of 3205 points. April saw a gain of 3354 points while March closed with a gain of 6168 points. The Platinum Service made a record 9619 points last October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
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