Brent topped $116 and stocks pulled back on fears of renewed U.S.-Iran hostilities after the midterm elections. For the week, small caps led with the Russell 2000 up 2% while the S&P 500 and Nasdaq slipped.
In addition to the negative correlation between AI stocks and yields this month (below chart is Philadelphia Semiconductor Index ($SOX) and 10-year yields)…
… we’ve seen weakness in the AI trade weigh on Fed rate hike expectations, on the idea that a softer AI complex means slower growth through both the buildout and equity channels, and so less need for hikes.
As noted in last night’s update, October is now a 93% chance of a hold, and December is less sure of a hike at 76% (from 88%). 2027 expectations dropped as well with now just 66 basis points of total hikes priced through December next year, down from 83 basis points Wednesday.
While there are some similarities to 1987, there are also some major differences.
Netflix exec choice raises more questions, Anthropic’s shifting IPO valuation, and other headlines moving the market this morning.
Here’s what I’m most concerned about the future of our economy. Also, let’s check on Warsh’s latest speech, the market rebound and the charts.
The October edition provides hawks a lot more to work with than August did.
Inflation is heading up again. Here’s what investors should focus on next.
Bonds are improving, but the stocks that should benefit aren’t responding.
The Fed’s triennial Survey of Consumer Finances showed income gaps narrowed while wealth gaps widened. Debt stress rose even as more families reported increased spending.
