Hello #Payrolls Friday!

Big day in the US with economists expecting 200,000 to 218,000 #NFP jobs for November; U6 of 4.1% to 4.2%; and AHE of +0.3% m/m and +3.9% y/y

Let's dig into the market 🧮! Mixed close to a strong week in Asia with SSEC ↗️ NIKK ↘️

$NIKK 39068 -0.8%
$SSEC 3404 +1.05%
$HSI 19866 +1.55% ⬅️
$KOSPI 2428 -0.55%
$IDX 7351 +0.5%

Australia ↘️
$ASX 8420 -0.65%

Bharat ↔️
$BSE 81731 -0.05%

Summary of FOMC Press Conference (09/18/24):

Jay Powell announced a 50 basis point (bps) cut to the federal funds rate, citing the need for "recalibration" of monetary policy as the economy continues to moderate. The labor market has cooled, with job growth slowing, and inflation remains slightly above target. Powell emphasized that policy adjustments are not on a "pre-set course" and will be made on a meeting-by-meeting basis to support the Fed’s dual mandate of full employment and stable prices. The Fed projects a federal funds rate of 4.4% by year-end, moving towards 3.4% by the end of 2025.

Key Points and Implications:

Rate Cut Justification: The Fed's decision to cut rates by 50 bps reflects a proactive stance in ensuring economic stability, acknowledging moderating growth and softening inflation pressures.

Economic Growth and Labor Market: While growth is forecast at 2.2%, the labor market has softened, with average monthly job gains of 116,000 over the past three months. This cooling labor market suggests the risk of inflation from wage growth has decreased.

Inflation Outlook: Despite inflation remaining above 2%, with core inflation at 2.7%, Powell believes inflation expectations are well anchored and sees the current policy stance as effective in bringing inflation down toward the target.

Future Interest Rate Trajectory: The Fed projects a median federal funds rate of 4.4% by the end of 2024 and 3.4% by the end of 2025. Powell stressed flexibility, indicating future rate cuts will be data-dependent.

Balance Sheet Policy: The balance sheet runoff will continue, with reserves expected to remain stable and abundant. There is no immediate plan to halt the reduction, which could signal tighter liquidity conditions.

Risks to the Economy: Powell highlighted that while the economy remains solid, risks have increased. The Fed is attentive to both its employment and inflation mandates and is prepared to adjust policy as needed.

No Pre-set Course: Powell emphasized that the Fed is not committed to further cuts or hikes at each meeting. They will take a "meeting-by-meeting" approach, carefully assessing economic data.

Housing Sector: Powell noted that housing remains weak, with market rents growing at a slower pace. Housing is expected to normalize as rates stabilize.

Implications for the Economy and Interest Rates:

Short-Term: The rate cut is expected to provide some support to the economy, preventing a sharper slowdown. However, the Fed remains cautious, particularly about the labor market and inflationary pressures.

Long-Term Interest Rate Outlook: The Fed's median projection of a federal funds rate at 3.4% by the end of 2025 suggests a more accommodative stance over time, though the neutral rate could be higher than previously thought.

Labor Market Impact: If labor market weakness continues, the Fed could make additional cuts to support employment, though Powell made it clear they are not currently seeing signs of rising layoffs.

Inflation Risks: With inflation still above the 2% target, the Fed will remain vigilant. The recalibration strategy is aimed at avoiding both excessive inflation and economic contraction.

Potential for Additional Cuts: If the economy weakens or inflation falls faster than expected, further rate cuts are possible, but Powell indicated the Fed will not rush, preferring to evaluate data as it comes in Average $SPX Returns (All Cycles 1985-2024):

1-month: +1.5%
3-month: +3.5%
12-month: +10.2%

Historically, the stock market's response to Federal Reserve interest rate cutting cycles has varied depending on the economic conditions that prompted the cuts. However, the overall tendency is for the S&P 500 ($SPX) to perform positively in the months following a rate cut, particularly as markets anticipate easier monetary conditions to support economic growth. Below, I'll provide a summary of historical data on how the S&P 500 performed after interest rate cutting cycles since 1985, followed by individual cycles and their performance over 1-month, 3-month, and 12-month time frames.

Interest Rate Cutting Cycles:

1985-1986 Cutting Cycle (Sep 1985 - Aug 1986) Trigger: Slowing economy after early 1980s inflation.
1-month: +2.0%
3-month: +4.0%
12-month: +23.7%

1989-1990 Cutting Cycle (Jun 1989 - Dec 1990) Trigger: Response to rising unemployment and slowing growth.
1-month: +0.5%
3-month: -3.8%
12-month: -2.9%

1995-1996 Cutting Cycle (Jul 1995 - Jan 1996) Trigger: Mid-1990s economic slowdown.
1-month: +1.7%
3-month: +7.2%
12-month: +18.9%

1998 Cutting Cycle (Sep 1998 - Nov 1998) Trigger: Russian default and LTCM collapse.
1-month: +6.0%
3-month: +19.3%
12-month: +31.7%

2001-2002 Cutting Cycle (Jan 2001 - Nov 2002) Trigger: Dot-com bubble burst, 9/11 attacks.
1-month: +2.2%
3-month: +3.8%
12-month: -18.3%

2007-2008 Cutting Cycle (Sep 2007 - Dec 2008) Trigger: Global financial crisis.
1-month: -0.5%
3-month: -11.8%
12-month: -37.0%

2019 Cutting Cycle (Jul 2019 - Oct 2019) Trigger: Global growth slowdown, trade tensions.
1-month: +0.6%
3-month: +6.6%
12-month: +14.7%

2020 Pandemic Cutting Cycle (Mar 2020) Trigger: COVID-19 pandemic economic shutdown.
1-month: -8.8%
3-month: +21.5%
12-month: +68.4%

2023-2024 Cutting Cycle (Sep 2024 onward) (pending future outcomes)

Key Insights:
Short-term response (1-month): Stock market reactions are mixed, but there is a mild positive bias (+1.5% average). Notable exceptions were during severe financial crises like 2007 and 2020, when the market had a negative 1-month response to rate cuts.

Intermediate-term response (3-month): The S&P 500 tends to perform better over a 3-month horizon after rate cuts, averaging +3.5%. This is a sign that markets begin pricing in the positive effects of lower interest rates, particularly when the cuts are meant to stimulate growth.

Long-term response (12-month): The best returns tend to be over a 12-month horizon, averaging +10.2%. Historically, 12-month performance was particularly strong in the 1995 and 1998 cycles, but weaker in more extreme economic downturns, such as 2001 and 2007.
In general, when rate cuts are made in response to slowing growth but not a full-blown crisis (e.g., 1995 or 1998), the stock market tends to perform well.

However, in more severe economic environments (2001, 2008), the positive effects of rate cuts are not immediately felt, and the stock market can experience continued weakness.

The current 2024 cycle, with the 50 bps cut in September, follows a mixed economic outlook (moderating growth but stable inflation), so the performance could align more closely with "mild slowdown" periods like 1995 or 2019, where cuts preceded solid market performance.

Hello Friday! 🥷

I don't know if it's the unwind of the Yen 💹 carry trade, the change in vol 🌊 regime , or a Fed that's too #tight in the face of weak economic date, but risk assets are getting pummeled 🗡️🩸

I doubt $NFP will save us

Let's dig into the market 🧮! Asia 🗡️🩸

$NIKK 35912 -5.75% ⬅️ 🙀
$SSEC 2905 -0.9%
$HSI 16946 -2.1%
$KOSPI 2676 -3.65% ⬅️ 😮
$IDX 7311 -0.2%

Australia ↘️
$ASX 7943 -2.1%

Bharat ↘️
$BSE 81182 -0.85%

Hello Thursday!

With FOMC 🏦 minutes 📓 (nothing 🍔 that gave you a #BTFD moment) and $NVDA 🚀 out of the way, the $VIX (along with metals and the $USD) is collapsing

This is unequivocally ♉️ equities

Let's dig into the market 🧮! Asian #dispersion ⬆️ ⬇️

$NIKK 39112 +1.3% ⬆️
$SSEC 3116 -1.35% ⬇️
$TWSE 21552 unch
$HSI 18869 -1.7% ⬇️
$KOSPI 2722 -0.05%
$IDX 7221 +0.5% ⬆️

Australia ↘️
$ASX 7812 -0.45%

Bharat ↗️
$BSE 74955 +1.0%

🐻♉️↗️↘️↔️⚠️🚩🔺🔻🧮 💰

Something strange happened in #macro markets this week 🧵 1/7

Inflation data pushed  🔺 and the #TRA pointed to coupon issuance 🔺, yet inflation assets sold off 🔻 and bonds caught a bid 🔺

Let’s dig into the 🧮! 2/7

Data and policy palooza this past week supported a phase transition to #stagflation

Hello Thursday!

"BOJ Board Member Nakagawa Says Japan Moving Steadily Toward Achieving Price Goal" and the $USDJPY rolls again…

Let's dig into the market 🧮!

wsj.com/articles/boj-b…
Asia closed ↔️ with $NIKK ↘️ 🥷

$NIKK 39598 -1.3%
$SSEC 3027 -0.4%
$TWSE 19694 +1.0% ⬅️
$HSI 16239 -1.25%
$KOSPI 2648 +0.25%
$IDX 7369 +0.55%

Australia ↗️
$ASX 7764 +0.4%

Bharat ↔️
$BSE 74073 unch

Hello Presidents Day!

The 🇺🇸 is closed for the holiday but 🇨🇳 is back after making 🥳 with the 🐉 for the past week

Let's dig into the market 🧮! In Asia, the $NIKK finding overhead near ATHs after a ♉️ breakout run to 38500

$NIKK 38470 -0.1%
$SSEC 2911 +1.55% 🇨🇳
$TWSE 18636 +0.15%
$HSI 16156 -1.15%
$KOSPI 2680 +1.2%
$IDX 7297 -0.55%

Australia ↔️
$ASX 7665 +0.1%

Bharat ↗️
$BSE 72718 +0.4%

Hello Monday!

The 🐻 markets in bonds, equities, and non-USD currencies continues unabated, even though equities are very oversold on a weekly basis.

This new 🪟 of weakness is not helping the ♉️s 🥐

But #Bitcoin 🚀

Let's dig into the market 🧮! In Asia, $SSEC 🇨🇳📉 from oversold levels

$NIKK 31,000 -0.8%
$SSEC 2939 -1.45% ⬅️ 🇨🇳
$TWII 16441 -0.05%
$HSI 17142 -0.65%
$KOSPI 2357 -0.75%
$IDX 6770 -1.1%

Australia ↘️
$ASX 6844 -0.8%

Bharat ↘️
$BSE 65058 -0.5%

Hello Wednesday! 🐫

@business headline:
"US bond market rout continues unabated; goes global"

ISM Services data release today is the potential catalyst for a painful reversal.

Let's dig into the market 🧮! In Asia, the $NIKK rout continued

$NIKK 30535 -2.15% 🐫
$SSEC holiday 🪩
$TWII 🪩
$HSI 17186 -0.5%
$KOSPI 2405 -2.4% 🐫
$IDX 6863 -1.15%

Australia ↘️
$ASX 6890 -0.75%

Bharat ↘️
$BSE 64939 -0.85%

Hello Tuesday!

After a one-day reprieve, the $USD is back in charge

Let's dig into the market 🧮 with trend and probable trading ranges! Asia, ex-NIKK, closed ↘️

$NIKK 32790 +0.95%
$SSEC 3137 -0.2%
$TWII 16433 -0.85%
$HSI 18023 -0.4%
$KOSPI 2537 -0.8%
$IDX 6939 -0.35%

Australia ↗️
$ASX 7207 +0.2%

Bharat ↗️
$BSE 67222 +0.15%

Hello Wednesday! 🐫

With the $VIX pricing right at the top of my range, has the sell finally come?

Let's dig into the market 🧮! Asia mostly ↘️

$NIKK 30693 -0.85%
$SSEC 3205 -1.3% 🐫
$TWII 16188 +0.05%
$HSI 19077 -1.8%
$KOSPI 2567 unch
$IDX 6732 -0.05%

Australia ↘️
$ASX 7214 -0.65%

India ↘️
$BSE 61913 -0.1%

Hello Tuesday!

The $USD 🎳 continues to tick 🔺 vs the $GBP +0.3% an vs. $CNY +0.22% even as #Bitcoin back > 27000

Let's dig into the market 🧮! The Asian ♉️ takes a hit ↘️

$NIKK 209578 -0.4%
$SSEC 3246 -1.5%
$TWII 16188 +0.05%
$HSI 19416 -1.35%
$KOSPI 2567 +0.4%
$IDX 6746 +0.25%

Australia ↔️
$ASX 7260 -0.05%

India ↗️
$BSE 62187 +0.35%

Hello Monday!

Slow start to the week with 🇯🇵 machine tool orders -3.5% as the debt ceiling drama continues in the background

Let's dig into the market 🧮! Asia ↗️ with 🗾 breaking to multi-year highs

$NIKK 31086 +0.9%
$SSEC 3296 +0.4%
$TWII 16181 +0.05%
$HSI 19722 +1.4%
$KOSPI 2557 +0.75%
$IDX 6741 +0.6%

Australia ↘️
$ASX 7263 -0.2%

India ↗️
$BSE 61895 +0.25%

Hello Thursday!

The lure 🎣 of the #opex flows 🌊 are generating a massive #FOMO 🚨

All aboard the equity 🚊!

Meanwhile, the $USD quietly ticks ↗️ into neutral territory…

Let's dig into the market 🧮! $NIKK ♉️ led Asian equities ↗️

$NIKK 30574 +1.6%
$SSEC 3297 +0.4%
$TWII 16102 +1.1%
$HSI 19705 +0.75%
$KOSPI 2515 +0.85%
$IDX 6663 -0.2%

Australia ↗️
$ASX 7237 +0.5%

India ↗️
$BSE 61653 +0.15%

Hello Wednesday! 🐫

$NIKK > 30,000 for the 1st time since Nov '21
#Bitcoin back < 27,000
#Copper eviscerated
$WTIC teetering at 70
$USD firm at 102.69

Let's dig into the market 🧮! Asian democracies ↗️

$NIKK 30094 +0.85% ⬅️♉️
$SSEC 3284 -0.2%
$TWII 15925 +1.6%
$HSI 19529 -2.25%
$KOSPI 2495 +0.6%
$IDX 6672 -0.05%

Australia ↘️
$ASX 7199 -0.5%

India ↘️
$BSE 61393 -0.85%

Hell Thursday!

Ahead of today's Q1 🇺🇸 GDP report, the @AtlantaFed has reduced its projected growth by a whopping -140 bps to only +1.1% 😮

Let's dig into the market 🧮!

https://twitter.com/AtlantaFed/status/1651254772375093248?s=20

Asia closed broadly ↗️

$NIKK 28458 +0.15%
$SSEC 3286 +0.65%
$TWII 15412 +0.25%
$HSI 19812 +0.3%
$KOSPI 2496 +0.45%
$IDX 6942 +0.45%

Australia ↘️
$ASX 7293 -0.3%

India ↗️
$BSE 60500 +0.35%

Hello Wednesday!

The ongoing divergence between $IWM and $RSP on one side and the $SPX and $QQQ on the other is the setup for the 🐫

Rising interest rate vol is also a good place to look with MOVE to 137

Let's dig into the market 🧮! Asia closed ↔️

$NIKK 28416 -0.7%
$SSEC 3264 unch
$TWII 15375 +0.05%
$HSI 19791 +0.9%
$KOSPI 2485 -0.15%
$IDX 6863 +0.55%

Australia ↔️
$ASX 7316 -0.1%

India ↔️
$BSE 60194 +0.1%

Hello Tuesday

Have you noticed the now almost daily $VIX pop in the overnight, providing bait 🎣 for vol 🌊 sellers?

Let's dig into the market 🧮! Asia mostly ↘️

$NIKK 28620 +0.1%
$SSEC 3265 -0.3%
$TWII 15371 -1.65%
$HSI 19618 -1.7%
$KOSPI 2489 -1.35%
$IDX holiday 🕌

Australia ↔️
$ASX 7322 -0.1%

India ↗️
$BSE 60243 +0.3%

Hello Monday!

This week is all about flowzzz 🌊 in the US with tax payments due today/Tuesday, Vixperation on Wednesday, and the end of a 5-week #opex cycle on Friday

Be on the lookout for 👱& 🧿

Let's dig into the market 🧮! Asia closed ↔️ with 🇨🇳 & 🇭🇰 ↗️ ahead of 🇨🇳 GDP

$NIKK 28515 +0.05%
$SSEC 3386 +1.4% 🇨🇳
$TWII 15929 +0.8%
$HSI 20786 +1.7% 🇭🇰
$KOSPI 2576 +0.15%
$IDX 6777 -0.06%

Australia ↗️
$ASX 7381 +0.25%

India ↘️
$BSE 59843 -0.95%

Hello Spring 2023!

The swap lines are open, and we're buying $GOLD $TLT and #Bitcoin (unbelievably)

But what about the Qs?

Let' dig into the market 🧮! Asia closed ↘️ with $HSI🩸🇭🇰

$NIKK 26946 -1.4%
$SSEC 3235 -0.5%
$TWII 15120 -0.2%
$HSI 19021 -2.55% ⬅️ 🩸
$KOSPI 2379 -0.7%
$IDX 6612 -1.0%

Australia ↘️
$ASX 6898 -1.4%

India ↘️
$BSE 57260 -1.25%

🐻♉️↗️↘️↔️⚠️🚩🔺🔻💰
Macro Review 03/10/23

🧵 1/8

The #Kraken may have been unleashed on financial markets this week with volatility up across asset classes.

Let’s dig into the critical 🧮 from the week!
© Adobe Stock 2a/8

After a week of reflation and my #CrashRiskRising call from 02/26/23, Jay Powell stepped up to the plate and told us “dot plot going higher.”

The UST2Y ripped, the curve inverted further, and the MOVE ↗️

Chart: MOVE index 140.06