A Choppy Week Ahead of Good News from Chairman Powell: Market Commentary from Cabana’s CEO – August 26, 2024

2 months ago

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We have seen some choppy markets over the past week as both stocks and bonds tried to find equilibrium after the big rally since the August 5 bottom, and ahead of Fed Chairman Powell’s speech on Friday. The Federal Reserve meets each year in Jackson Hole, Wyoming for its annual retreat. Investors have been waiting for confirmation that a rate cut is on the way. We have had solid data recently showing that inflation is on track to hit the Fed’s 2% target. This, coupled with softening of the job market has the bond market pricing in the near certainty that a rate cut is on deck for September – but we still want to hear it from the man himself. 

Chairman Powell gave us what we wanted and confirmed it is now time to “change policy”. He didn’t say when or by how much, but you really can’t expect him to. He said what needed to be said and that is enough for me – and it seems everyone else. Stocks rallied and bond yields dropped. The next talking point will be whether the first cut is 25 basis points or 50. The job reports over the next few weeks will likely have the answer. If jobs hold up, I expect a 25 basis point cut. If jobs weaken further, a 50 basis point cut is possible.  

In any event, this is good news. As I stated two weeks ago, history says risk assets do well at the end of a hiking cycle (and we just had a doozy of a hiking cycle). All this presumes we don’t get a recession. That is why the jobs data is so important. 

At Cabana, we remain bullish and are allocated accordingly. 

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January 17, 2024

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