As expected, the Fed cut rates in this FOMC. My previous view was a 25bp cut, but my prediction was wrong, and the Fed cut rates by 50bp. If you look at the Fed’s economic outlook released at the FOMC, you can see that growth is solid, there is confidence about inflation, and there are some concerns about unemployment. I was personally surprised that the Fed cut rates by 50bp in the first rate cut, but it makes sense if the purpose is insurance. In addition, an additional 50bp cut is scheduled by the end of the year. It seems that the market was concerned that the pace of rate cuts would slow down after Powell’s remarks that the neutral rate has risen, but if you think about it, it doesn’t seem surprising. We will not return to 0% interest rates as before.
In conclusion, I think the Fed’s 50bp cut was very good.
The market has been up across the board since the 50bp rate cut. The bottom line is still the same. A recession after an interest rate cut is bearish, and if there is no recession after an interest rate cut, it is bullish. The economy is a huge circle. People still try to find a formula for everything. Rate cut = bearish… That’s clearly wrong.
Currently, I believe we are in a Goldilocks situation, so unless something special happens, I am maintaining my bullish view on risk assets. There may be inflation concerns again next year, but not right now.
Elevated profit margins have been a key factor in allowing businesses to retain labor and delay layoffs despite objectively slowing business conditions. – EPB Research
Non-seasonally adjusted jobless claims are on a different path than a recession. If we were in a recession, we would see a surge in jobless claims. Currently, I do not see such a phenomenon…
Retail sales exceeded expectations and, as in our previous analysis, consumption appears solid. The Empire State Manufacturing Index also came in higher than expected, suggesting that New York manufacturing may be picking up. This is closely tied to the ISM data, which could trigger recession risks, and the positive sign is that recovery is likely to be on the rise.
Next Thursday, GDP data is due to be released. Looking at ‘GDP Now’, the NY Fed +3% and the Atlanta Fed +2.9% support my view of ‘disinflation + growing economy’ for over a year. In my opinion, the economy is continuing to grow and there is no recession in sight…
Finally, credit. Credit spreads are still very low. Clearly, this does not look like a recession. Despite the fact that many have been claiming over the past two years that inflation is rising again and a recession is just around the corner, this has not happened… The leading real estate ETFs – VNQ and high yield ETFs – HYG have continued to rise. Imagine we’re in a recession and people are buying junk bonds.
I am patiently watching BTC rise based on macro analysis. I can’t say it’s a perfect trend reversal yet, but structurally, creating a higher high (HH) and breaking the 200DMA will be signals to confirm the trend reversal. 65k looks like a major turning point, and while both up and down are possible at the moment, I expect it to go up. It is likely that a trend will start in one direction or another starting from October. There is no eternal sideways movement.
NFA DYOR
<Source : EBP Research, Eric Wallerstein, Apollo, CreditSpreadAlert, NY Fed, Atlanta Fed>
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