Breakfast Bites - Mixed US Equities; China tech shines
BABA up 7%; Trump's spicy UN address; US equities don't like Powell's speech
Rise and shine everyone
US Equities pulled back quite a bit yesterday after Fed Chair Powell didn’t emphatically jump up and down about the forthcoming rate cuts!
I am a little surprised that the market thinks that all he should be doing is reinforcing the idea of rate cuts, particularly when we saw the dot plot dispersion.
The Fed is confused, and rightfully so. We’re at a point where things are not going according to plan. The labor market is showing weakness, and inflation remains sticky. Yes, they’ve put out a projection of 3% and core 3.1% for the year, but they’d obviously feel much better if inflation came in below that.
We also got US PMI readings earlier in the day that confirmed both these - slowdown in hiring, and companies unable to pass on the costs to the customer because of a slowdown in buying. So here’s the situation - whether it falls on the company, or the individual - the end result is either a slowdown in employment or an increase in inflation, or both.
This is exactly what we’re seeing, and the Fed is right to be concerned about whether cutting 3 times this year is right or not.
As far as equities are concerned, we’re on an easing path - either slower or faster. That should provide enough of a floor to keep this rally going with minor pullbacks along the way. Truth be told, some correction is healthy and gives us the opportunity to buy!