Morning Commentary
One of these is the end of the world; the other is just an asteroid hurtling toward Earth at the speed of sound. There it is, ladies and gentlemen – this is what ‘higher for longer’ looks like on a chart.
I’m joking because this is almost comical, although in a macabre kind of way. Yesterday, the Fed laid out a forecast that looks like a soft landing and pushes back on a potential tidal wave of rate cuts next year.
Arsonists to the Rescue
Here they come. Fed members parachuting all over the nation, perhaps to calm the waters. The market hasn’t traded well since the Fed entered its blackout period. I may have to stop all my bellyaching about them talking too much. That all depends on what they say today.
Higher Forever
This was a good article in the Wall Street Journal. Still, it didn’t offer much clarity and the reality that there are undesirable and immeasurable forces in the economy mitigating the impact of the Federal Open Market Committee (FOMC) actions. The result is the neutral rate is evaluated.
This means long-term duration has to pay out more; hence, bond yields are in a stratospheric rally, and stocks are stumbling around. It all makes me wonder why the Fed doesn’t lift their inflation target to 3.0%
Brutal
It was just one of those days where there was nowhere to run or hide. All eleven sectors were lower. Bonds were down, gold was down, and crypto was down. Health insurance stocks held up.
More Fear No Panic (yet)
People are more fearful nowadays, but some of that’s because we all became somewhat sanguine.
That sanguine feeling is beginning to fade as the CBOE Volatility Index (VIX) spiked much higher yesterday. These things can build upon themselves.
Portfolio Approach
We suspended our Current Buys in the Hotline Model Portfolio yesterday. We are adding back two positions for now.
Message of the Bond Market
The rise in bond yields is the main focus of the market, especially after asset managers loaded up big time this summer (tomorrow is officially the last day of summer). That bet has been a bone-crusher and it might get worse.
The thing is, Treasuries have never been down three years in a row (two years in a row is rare).
From a technical perspective, the gap opening in the ten-year could prove to be monumental, signally the start of the next leg higher.
Comments |
Here's my take on Bonds. The only thing predictable about Biden is reckless spending. The Fed cannot control interest rates when there is uncontrolled spending. US Bonds have been downgraded and the attack on the dollar makes futures unpredictable. Except for reckless spending. This makes it safer right now to pause on the sideline for Bonds. P. Krueger on 9/22/2023 4:03:25 PM |
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