Inside Markets — Updated Dot Plot
Almost all developed markets have been forming bearish distribution patterns over the last two months and the small-cap Russell 2000 (RTY) has been one of the weaker major US indices during this period.
Inside Markets — Equity Multiples
It’s otherwise quiet into tomorrow’s Fed decision with OIS markets still pricing in a pause, while the probability for another ’23 hike (November 1 or December 13) increased to 45% from 40% overnight.
Inside Markets — Updated Dot Plot
The Fed is widely expected to pause at this week’s meeting. The updated dot plot seems to be the wildcard with a ~30% chance for the median dot to price out another 25bp hike for 2023.
Inside Markets — Bear Market Patterns
The NY Fed’s Empire manufacturing survey was stronger than expected, with new orders and prices received surprising to the upside.
Inside Markets — Policy Uncertainty
This morning’s August CPI print did little to shift the inflation narrative in either direction. Headline CPI came inline, up +0.60% MoM, while the rounded core rate came in hotter, up +0.3% vs. expectations for +0.2%.
Inside Markets — Future Return on Cash
This morning’s August CPI print did little to shift the inflation narrative in either direction. Headline CPI came inline, up +0.60% MoM, while the rounded core rate came in hotter, up +0.3% vs. expectations for +0.2%.
Inside Markets — CPI, The Fed and Volatility
Implied equity volatility has been a nonfactor for markets since late March, which is why we’ve added it to the ‘Markets’ section above. High levels of volatility provide a strong headwind for equity markets, while low levels cushion potential downside.
Inside Markets — Optionality
In our opinion, the near-term bullish narrative first needs to include an implicit or explicit announcement from the Fed that the hiking cycle has ended.
Inside Markets — Higher Bond Yields
A combination of rising oil prices and heavy corporate bond issuance on Tuesday plus yesterday’s stronger ISM services report will result in higher bond yields, which puts pressure on equity markets.
Inside Markets — Declining Inflation
ISM services for August came in stronger than expected with new orders, employment and prices all higher MoM. The data keeps upward pressure on bond yields.