Wednesday, June 12, 2019

This Morning's Log Entry

Last week’s rally carried through Monday and into the morning on Tuesday; turning around intraday and closing lower. This morning the Dow and S&P are floating around break even, while the Nasdaq is off .22%.

Inflation data has come in very tame this week, while the May small business optimism read was remarkably high and this morning’s mortgage apps number was hugely positive!

While the tame inflation emboldens those betting on a Fed rate cut, which fueled the recent rally, the latest data, in the aggregate, certainly doesn’t justify a cut at this month’s meeting; no cut next week could see stocks selloff notably. There is, however, a growing narrative (Paul Tudor-Jones this morning) that the Fed understands the monster economic risk of trade war-escalation with China and will want to get in front of it just in case, and can use weak inflation as the excuse to go ahead with a cut. The latter, by itself, would spark a strong rally in stocks!

Without a serious market downturn in the meantime (which would virtually have to be precipitated by negative trade rhetoric), I see low odds of a Fed rate cut next week…

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