A Unique Week in the Markets Following Thursday’s Presidential Debate: Market Commentary from Cabana’s CEO – July 3, 2024  

3 months ago

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On Friday, we got some good news on the inflation front with a lower than forecast PCE report. This should have caused bond yields to drop and bond prices to rise. Stocks of all types should have followed suit with interest rate sensitive sectors like real estate, dividend payers, small caps and the like leading the way. Instead, bond yields jumped big time Friday and continued climbing Monday. Bond prices fell and the outperformance in stocks was limited once again to technology (QQQ). This is a real head scratcher and makes little sense (to me) given the “good news” and increasing odds of a rate cut by the Federal Reserve. What could be the cause of the market’s reaction? Could it have something to do with the presidential debate the night before? Could it be that investors have spent the past few days pricing in a Trump win in November rather than focusing on the all-important PCE print? I don’t know and didn’t come up with the idea on my own but it kind of makes sense. Something pretty big must have rumbled somewhere to get investor eyes off the inflation news. I have said many times that the bond market gets it first and pulls the strings – and Friday it moved hard away from the playbook in everybody’s hands. 

Without falling into politics here, even my most Democratic friends were freaked out by President Biden’s seeming incapacity and the likelihood that former President Trump could get reelected. If left leaning people are immediately throwing in the towel on a contested race, maybe the markets are too, and are now planning for the next Trump term in office. Maybe that is why yields jumped so quickly and for no apparent reason. Trump pushes growth and growth pushes inflation. Inflation pushes bond yields. All this is just speculation on my part but something to think about after a unique past week. 

As we head off to celebrate our country’s independence during a divisive time in our history, let me suggest that we are all Americans and when the going gets tough we have each other’s backs – even when we disagree. It is this underlying commonality that has brought us through Civil War, two World Wars and countless other crises. I believe it will again and am thankful to be a tiny part of this amazing nation. Have a great 4th of July with your family and friends! 

 At Cabana, we remain bullish. 

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January 17, 2024

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