Important Notices: The Week Ahead
By John Thorpe, Senior Broker
Jackson Hole Economic Symposium, 6th inning of the Earnings season, Fed Speakers, FOMC minutes
Retailers report earnings next week, WMT, TGT, Home Improvement Icons HD and Lowes
A three-day annual global symposium Begins Wednesday with Fed Chair Powell who is expected to be at the podium at 9:00 am CDT Friday. The theme? “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy.”.
I find Jackson Hole every year has the same effect, Powell by necessity cannot tell us he is going to cut or not going to cut at the next Fed Meeting in September. According to the CME FEDWATCH tool the current probability of a ¼ bps cut is hovering around 88%. The Fed Has 2 mandates Inflation @ 2% and a stable workforce. If Inflation is above their target 2%, , following the mandate rule, the committee should not cut borrowing rates. If a rate cut is announced, then a rate cut should be taken as the economy is not performing well and needs the lubrication offered by a lower borrowing rate. What is confusing to the layperson is the words of the past don’t match the actions taken. Inconsistency.
The last 3 Fed Rate reductions were 9/2024 when the rate of inflation as measured by CPI was 2.9 the month prior. (Hight) Rate moved down ½ bps. Next, 11/2024 when the prior month CPI was 2.6. (Better) Rate moved down ¼ bps. Finally, 12/2024 when the prior month CPI was 2.7. (Sameas the past 2 months) Rate reduced an additional ¼ bps.
Since the last rate decrease to 4.25-4.5%, the CPI Monthly rates have been as follows: 3.0 (jan ’25) then each subsequent month 2.8%, 2.4% ,2.3%,2.4% ,2.7% and this Past July ,2.7%. and no new Fed Borrowing rate reductions.
Tariff impacts are creating volatility in commodity markets for prices moving both up and down. (industrial metals, Orange Juice, Coffee, Grains) the news about China (extending negotiations out another 90 days ) is calming to our many markets. The on again off again nature of the talks has created golden opportunities for breakouts in some markets, rangebound trades in others. (see gold commentary below)
The Trump-Putin meeting has become the main commodity market news of this week, with analysts speculating about the likelihood of a comprehensive deal and the impacts this could have on oil markets. ICE Brent has been gradually sliding closer to $65 per barrel as lower sanction risks on Russia could further erode the market’s in-built risk premium, however a potential failure in the talks could spark another price rally above $70. Remember that current market drivers for Equities are hard data on Jobs, Inflation, Trump tweets and Geopolitics. There is a high probability the results of the meeting will not be public until after the markets’ close today.
Three weeks ago, I wrote this: Watch for the gold market to maintain its rangebound stance, close below 3350 (basis December) or above 3500 should denote a breakout, begin trading the December(Z) contract next week. Two weeks ago, I wrote: Dec gold traded below 3350 today and the past three days but never closed meaningfully below 3350.0 (3348.60 Thurs.) Today we have breached $3500.00 oz with a high in the $3543.00 area per oz. while currently trading @$3493.00 oz as of this writing. Look for a close above $3500.00 on successive days to again accumulate longs. This may be the break from this range we are looking for. Manage your downside risk according to your account size, risk no more than 15-20% whether with options or futures. Today, August 15th as of this writing that 3500.00 oz did not hold, always wait for confirmation prior to taking a position, several consecutive closes above or below a range is a start. We are teasing the bottom of the range today Dec gold in the 3380’s, I see psychological support @ 3350.00
Continued volatility to come as next week all markets will be reacting to whatever comes out of U.S. Govt leadership relating to conflicts cessation and trade deals, especially with China, India and Russia, remember that Mexico’s extension will end October 29.
Earnings Next Week:
- Mon. Quiet
- Tue. Home Depot, Medtronic, Toll Brothers
- Wed. TJX Companies, Lowes Analog Devices Inc., Target
- Thu. Walmart, Intuit, Workday, Ross Stores
- Fri. Quiet
FED SPEECHES: (all times CDT)
- Mon. Quiet
- Tues. 1:10 pm Bowman
- Wed. 10 am Waller, 2 PM Bostic
- Thu. Quiet
- Fri. 9am Fed Chair Powell
Economic Data week:
- Mon. NAHB Housing MKT index.
- Tue. Bldg Permits, Housing Starts, Redbook,
- Wed. EIA Crude Stocks, 17-week Bill auction, FOMC Minutes, Jackson Hole begins
- Thur. Philly Fed, Jobless claims, EIA NAT GAS Storage, S&P PMI Composite, Existing Home sales Fed Balance sheet, Jackson Hole continues
- Fri. Fed Chair Powell
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