What Does It Mean: Other than the obvious, it’s a nice reminder of what can happen when the negativity becomes as high as it was last week. Our ‘Sour as I’ve Seen it Piece’ worked to point out the other side of volatility that gives rise to markets just when emotions want to take hold. In my opinion, staying the course is often the best strategy and this is another great example of how important it is to remain objective and open minded to the good that can occur when all others are simply pointing to the bad.

Quint discusses this a bit on local radio this week which can be heard HERE.

Why do we care? The rise in stocks this week began on Monday when the Dow advanced over 500 points for no apparent reason whatsoever. Often this occurs when so many are looking for a weekend catalyst to send stocks lower that unfortunately for the bears, never comes. Wednesday opened with lower than anticipated ADP Employment data as well as a surprising drop in the Institute of Supply Management Manufacturing reading which was much less than expected. These data points suggest an economic slowdown which in turn suggests lower inflation and thus lower rates. As if on script the Fed decision later that day to keep rates steady and a much more moderate press conference sent stocks higher into Wednesday afternoon and Thursday.

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What Happened: Jamie Dimon from JPM calls out Federal Reserve. Stan Drukenmiller calls out Treasury.

What Does It Mean: In my opinion, our country finds itself in a difficult predicament as US spending seems out of control with no end in sight. With significantly higher interest rates, this means that all US debt now carries a hefty interest rate expense and thus impacting other spending obligations. When high profile people such as Jamie Dimon the chairman and chief executive officer of JPMorgan Chase or Stan Drukenmiller, in my opinion and many others one of the greatest investors of our generation, begin to publicly call out fiscal issues such as this, I believe political pressure begins to mount. With an election season right around the corner, budget deficits and national debt take more and more precedence.

Why do we care? Stocks have taken their cue from interest rates, which are now impacting much more than just inflation. As US interest rate policy moves into the political realm, I am of the opinion that political pressure will be yet another roadblock for higher rates. If this outlook is accurate, I further believe we have seen the peak in short term rates and inflation. As rates come down it would make sense to see stocks advance and thus this week may be a precursor to what we see throughout the remainder of the year and into 2024. Just when so many others remain bearish and pessimistic, I continue to find myself in the optimistic camp going forward.

Until next time

~ Quint

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