"As for the Iran situation, while both sides have engaged in negotiations over the past week, and during the UN session, their respective speeches at said session did anything but assure markets that a deal is close at hand... Although that -- in terms of agreeing to at least a short-term respite -- can change in a heartbeat, as we've experienced."
Headlines a few minutes ago:
Per yesterday's message herein, the very recent action in markets has been virtually across-the-board risk-off... Although, while this morning we're once again seeing weakness in the major global equity averages, in commodities (including precious metals), and bigly in bonds, our US healthcare, communications and of course energy (as oil continues its ascent) are offsetting a bit of the pain so far this morning.
Suffice to say, September is thus far fulfilling its historical role as the worst month of the year for markets, reflected in the broader equity averages (such as the S&P 500 equal weight) in particular.
Rough day for markets today, pretty much across the board... I.e., your most diversified portfolio took an outsized one-day hit as everything from global equities, to bonds, to precious metals got escorted to the woodshed:
Clients and regular readers will note that as recently as, say, a month (or less) ago, I was firmly of the mind that the Fed would not hike rates anytime soon... A view that markets demanded that I reconsider just ahead of this week's Fed meeting.
Here's from my commentary on Tuesday, where I referenced my commentary from the previous Friday:
From last Friday's note:
"...this is the environment where a hike actually could lead to lower 10 and 30-year yields... If that's the case the Fed may be comfortable hiking next week, which may have me sympathizing with the consensus after all... Although there's still the mid-term election and federal debt issues I mentioned yesterday for the Fed to contend with."
Suffice to say that a hike is what's needed to bring down longer-term rates has become the consensus view... But only if it's followed by a statement and/or press conference that implies there'll be zero hesitation to hike again should conditions dictate... I.e., the language has to be sufficiently hawkish.
With oil at $100/barrel and producer prices not remotely letting up, fed funds futures are pricing in a 70% chance of a rate hike come next Wednesday.
While the Fed, under previous leadership, is known for not bucking market expectations, if there was ever a time for it to do so, it's now.
