FOMC day is upon us all, WWPD? We'll see what the Powell Rangers are up to later this afternoon. The focus will clearly be on whether the cut is 25bps or 50bps and secondarily on "the Dots". The rest will be about how they discuss "risk management" and perhaps even a nod to r* estimates. We'll know more in a few hours. I'm sure there might also be a question or two around cutting rates ahead of the election thrown in there.
So retail sales coming in better than expected and really showing no major weakness. The headline retail sales rose 0.1% MoM against an expectation of a decline of 0.2%, while the "core" (ex autos, gaso, and building materials) rose 0.3% matching expectations. Nonetheless, the most important retail sales print of your lifetime apparently settled nothing in the Fed rate cut debate. The new narrative is that whatever decision the Fed makes around 25 or 50 that there will be some dissent.
Away from retail sales, industrail production beat expectations, rising much more than forecast helped by motor vehicle assemblies. Following both data releases the Atlanta Fed GDP now is estimating 3% real GDP for Q3, up from 2.5%. That certainly doesn't scream recession, but who knows.
Then there's the possibility of war between Isreal and Hezbollah following the alleged Isreali attack on Hezbollah pagers yesterday which reportedly injured 4,000.
As we had into the FOMC decision we have stocks at/near all-time highs, a 10Y ~3.65% and a 2Y ~3.60%.
XTOD: 14 months since last @federalreserve rate hike. Longest in history was 15 months into the eye of the Great Recession.
XTOD: The Fed faces a finely balanced set of considerations over whether to cut by 25 or 50 basis points at its meeting that begins today. The case for 50 comes down to what Fed officials call risk management but what might be thought of as regret minimization. Per former Dallas Fed President Rob Kaplan, if you cut 50 here and you think the Fed will need to cut again after that, you are unlikely to regret such a cut even if the economy chugs along between now and your next meeting. But if you cut 25 and things worsen a lot in the coming weeks, you'll feel bigger regret as you'll be behind the curve.
The case for 25 boils down to some combination of 1) process issues (i.e., 50 will signal something more urgent; there's an election soon; communications were not explicit enough about 50 in the run-up to this meeting), 2) a view that the economy is doing just fine and will continue to do so with more gradual reductions, and 3) that because financial conditions are easy (in part because markets expect the Fed to deliver a string of cuts), igniting risk assets could make it harder to finish the inflation fight.
There is a gift link to the full article here:
https://wsj.com/economy/central-banking/fed-interest-rate-cut-size-79a238ca?st=QvUaSC&reflink=desktopwebshare_permalink
XTOD: A Major Incident has happened this morning across Lebanon, leaving between 1,500 and 2,000 Senior Members of Hezbollah and other Iranian-Linked Individuals in Critical Condition, following some kind of Hack causing Encrypted Pagers used by the Organization to all Simultaneously Explode.
XTOD: "Too much capital availability makes money flow to the wrong places." — Howard Marks
XTOD: The key to compounding is to get started.
XTOD: You don't have to be special to be successful. Ordinary people can do extraordinary things by choosing to be what most people are unwilling to be: consistent, hardworking, patient, and determined. Simple, but not easy.
XTOD: As you get older, you’ll realize that a $30,000 watch and a $30 watch both tell the same time.
A Gucci wallet and a Target wallet hold the same amount of money.
A $10,000,000 house and a $100,000 house host the same loneliness.
A Ford will also drive you as far as a Bentley.
True happiness is not found in materialistic things, it comes from the love and laughter found with each other.
Stay humble… the holes dug for us in the ground are all the same size.
https://x.com/DiMartinoBooth/status/1836103541267796041
https://x.com/NickTimiraos/status/1836034993140695283
https://x.com/sentdefender/status/1836061232433930309
https://x.com/InvestingCanons/status/1836043109005685026
https://x.com/Gautam__Baid/status/1836055463638520064
https://x.com/ShaneAParrish/status/1836044223021252790
No comments:
Post a Comment