In today’s briefing:
- Aggressive Start to Fed Policy Easing Cycle Aimed at Reducing Stress at Low Income Consumers?
- S&P 500 Breakout or Fake-Out?
- U.S. Soft Landing: What Could Possibly Go Wrong?
- Copper Tracker Sep 23rd, 2024: Markets Volatile, Accumulate Good Copper Names On Weakness
- The BoJ Keep Rate Unchanged in the Sep 20 Meeting
- Iron Ore Tracker (23-Sep-2024): Liquidity in China Provides Relief, Still Bearish Short-Term
Aggressive Start to Fed Policy Easing Cycle Aimed at Reducing Stress at Low Income Consumers?
- The Fed has begun its easing cycle with an aggressive 50 basis points reduction in its policy rate, but, thereafter, conduct will remain data dependent.
- Lower-Income household stress has become increasingly evident over the past year, particularly in subprime auto loans and credit cards. Lenders have tightened lending standards and accepted higher bad debt charge-offs.
- Lower-Income households will benefit more directly from the Fed’s policy shift due to their higher exposure to liabilities priced off short-term interest rates.
S&P 500 Breakout or Fake-Out?
- The stock market is exhibiting strong positive price momentum, but in the face of a seasonally weak period for stocks.
- In Finance Land, seasonality determines the climate, and the combination of fundamental, technical and macro factors determine the day-to-day weather.
- In the very short term, the weather is bullish, but stock prices are ultimately determined by the growth and interest rate outlook.
U.S. Soft Landing: What Could Possibly Go Wrong?
- A U.S. economic soft landing has become the overwhelming consensus, what could possibly go wrong? A growing chasm is appearing between bond and stock market expectations.
- The bond market is expecting nearly 2% in rate cuts to September 2025, which signals recession, while the stock market is expecting strong earnings growth amidst elevated P/E valuations.
- We find that conditions are supportive of a soft landing.
Copper Tracker Sep 23rd, 2024: Markets Volatile, Accumulate Good Copper Names On Weakness
- With increasing market volatility, base metals continue their rocky weekly performance. Copper was up marginally maintaining a level over 9000 USD/ton.
- Copper inventories declined at the exchanges, with ~428k tons combined at Comex, LME, and Shanghai, down almost 9% in the last two weeks.
- Read our recent initiation on Antofagasta PLC (ANTO LN), contrasting it with Southern Copper (SCCO US) titled Antofagasta (ANTO LN): An Initiation on a Mid-Sized Copper Miner.
The BoJ Keep Rate Unchanged in the Sep 20 Meeting
- At the September 20 meeting, the BoJ keep rate unchanged at 0.25% and guide there will be more tightening by suggesting the current inflationary trajectory aligns with BoJ’s forecast
- . The BoJ has taken a hawkish tilt in the July meeting by providing a hawkish forward guidance.
- “If outlook for economic activity and prices are realised, will continue to raise policy rates and adjust degree of monetary accommodation accordingly”
Iron Ore Tracker (23-Sep-2024): Liquidity in China Provides Relief, Still Bearish Short-Term
- Iron underperformed the commodity complex, falling 1.2% WoW, vs the average complex performance of 3% WoW.
- PBOC rate cuts have yet to spur borrowing significantly. Despite the seasonal uptick, loan growth has trended negatively.
- We remain cautious till China shows any sign of a pick-up in demand. Indicators like mill margins and property/auto demand continue to be uninspiring.
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