Stocks again at record highs. U.S. service sector activity appeared to be quite strong while also showing some easing in pricing pressure, all keeping future rate cuts on the table. And sure, I'll say "AI" just to say it. For all you know AI writes this blog and this blog obviously contributes to the market cap of all AI stocks. Yields were down again with the 2Y at 4.73% and the 10Y at 4.29%.
Away from market highs the theme of central bank divergence will likely be one that investors eventually focus on. The BoC cuts rates by 25bps to 4.75% as expected, while citing upside risk to inflation and today, the ECB is expected to cut rates. Arguably we've been through many recent cycles where major central banks all were acting in a largely coordinated manner (see Nomi Prins book "Collusion") and now seem to be embarking on a potential period of divergence with the U.S. likely on hold, Japan possibly hiking, and other domestic central banks cutting, as well as some EM banks. What this might mean for international finance, exchange rates, etc. could be interesting.
That said you can find a perhaps growing chorus of economist calling for the Fed to cut rates soon. Brad DeLong reviewed some arguments by Paul Krugman in a blog post here. One of the central arguments ends up being related to everyone's favorite r* (r-star). Ultimately seeming to conclude that interest rate cuts are needed to bring 10Y real yields back closer to 1.5%.
On the day ahead it's jobless claims, ECB rate decision and people getting ready for Jobs' Day Friday.
XTOD: Let me bust this nonsense once and for all. There is a myth out there that weak data will lead to rate cuts which will lead to a melt-up in equities. That’s not only moronic but also proved to be wrong in every cutting cycle since the 70s. While it’s in character for the market to rise in the months following a hiking pause, it ended on average 23% lower over the 200 days following the first cut.
XTOD: Lots of talk about an economic slowdown, but what exactly is slowing down? tl:dr, surveys of opinions, not actual or "hard" data.
XTOD: Babe, wake up, new Maboussin paper just dropped. https://morganstanley.com/im/publication/insights/articles/article_stockmarketconcentration.pdf?1717518526766
XTOD: Over the past 32 trading days, NVDA has gained more than $1 trillion in market cap. To put that into some sort of perspective, the 6-week gain is greater than the total market cap of BRKA, which Warren Buffett has spent 6 decades in building.
XTOD: "stats show that only about 10 percent of elite 10-year-old athletes are still elite at 18. Only eight percent of Nobel Prize winners and world champions were child prodigies. In fact, the only thing that early success guarantees is … early success" (John O'Sullivan)
XTOD: U.S. general predicts war with China in 2025, tells officers to get ready. In the memo sent Friday and obtained by NBC News, Gen. Mike Minihan, head of Air Mobility Command, said, “I hope I am wrong. My gut tells me will fight in 2025.” Air Mobility Command has nearly 50,000 service members and nearly 500 planes and is responsible for transport and refueling.
Minihan said in the memo that because both Taiwan and the U.S. will have presidential elections in 2024, the U.S. will be “distracted,” and Chinese President Xi Jinping will have an opportunity to move on Taiwan. https://nbcnews.com/politics/national-security/us-air-force-general-predicts-war-china-2025-memo-rcna67967 via
@nbcnews
XTOD: “What is success? It is an inner and indescribable force, resourcefulness, power of vision; a consciousness that I am, by my mere existence, exerting pressure on the movement of life about me. It is my belief in the adaptability of life to my own ends. Fortune and success lie within ourselves. We must hold them firmly—deep within us.” — Thomas Mann
https://x.com/INArteCarloDoss/status/1798356333810311654
https://x.com/biancoresearch/status/1798358653147418981
https://x.com/InvestmentTalkk/status/1798029553157460150
https://x.com/jessefelder/status/1798415445999173809
https://x.com/JeremyFrisch/status/1798319504918974968
https://x.com/DrPippaM/status/1798344901610050021
https://x.com/tferriss/status/1797634263778529773
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