Financial News vs. Noise
I am traveling Tuesday and Wednesday, be back Thursday
What a week. Better than expected jobless claims and retail sales put aside all the recession fears and generated at rally that’s now lasted 7 days and almost completely erased the drop in July. Other than Jackson Hole on Friday and Fed minutes on Wednesday, not a lot of market moving data this week. The only real speculation at this point is whether we get 50bps or 25bps in September. Honestly, not sure what would be better for the market. You could make an argument that if they cut 50 that means something is broken, or near broken.
We have seen a shift in the economic numbers, at least for now. It used to be good news was bad news, that’s changed with recent recession fears. Don’t let the stock market’s best week of 2024 fool you — there’s a new game in town A ‘bad news is bad news’ environment means there’s less room for error when it comes to economic growth-MarketWatch
Solid progress on inflation is good news in that it clears the way for the Federal Reserve to begin cutting interest rates. But the focus on slowing growth means investors are now much more attuned to fears that a widely hoped economic soft landing could instead turn into a recession.
Goldman Cuts US Recession Risk Following Retail Sales, Jobs Data-Bloomberg
Goldman Sachs Group Inc. economists lowered the probability of a US recession in the next year to 20% from 25%, citing this week’s retail sales and jobless claims data.
If the August jobs report set for release on Sept. 6 “looks reasonably good, we would probably cut our recession probability back to 15%, where it stood for almost a year” before a revision on Aug. 2, the Goldman economists led by Jan Hatzius said in a report to clients on Saturday.
Real interesting take on the market gyrations from Jefferies….
Data last week has reduced the probability of a hard landing. In our view, the recession fears were more a reaction to the market moves in early August rather than driven by fundamentals. Unfortunately, the street rushes to justify a market reaction rather than acknowledge that it could have been driven by positioning and technicals. As we have argued a number of times, at least half the flows in fixed income and equity markets are driven by Algo accounts who trade on models and do not care whether there is a thing called inflation or growth or there is something called the Fed or ECB. These Algos tend of exaggerate market moves and the street tries to justify these market moves by trying to fit a macro narrative.
Futures are slightly red, but VIX is up almost 7%. Perhaps something to keep an eye on.
Anyone who thinks AI is overhyped….
