Well our holiday week came out poorly as far as the equities market is concerned.
We dropped over 2% on the various averages and indexes.
It was again the Mag 7 that took the lead down. It did not help that the employment data was less than stellar.
The unemployment rate dropped a tenth of a point while new jobs were less than expected.
This lead to all sorts of reasoning backing a 50- or 25-point drop by the Fed this month.
The arguments are over whether we will have a soft landing or are headed into a recession.
From my point of view, it seems the economy is slowing, but not to the extent that we would be in a recession.
This week we will get the CPI report for August, a Presidential debate and Apple will release the iPhone 16.
That should give us quite the food for thought.
I am not sure I have the stomach for the debate, but probably will watch as it may be the only opportunity to see what these candidates are really like.
The last debate did, in fact, change the course of this election.
The Apple news will be of interest as the new phone will have AI capabilities.
The problem is that the iPhone 15 Pro has that ability, but costs $1,000.
I am not sure that you can get widespread appeal for a phone costing that much.
It should be noted that most phone plans just spread the cost over the next couple of years raising the monthly a bit.
They have taken the notion from the car industry. People don’t seem to care about the total price as long as they can cover the monthly.
The screen is to be larger and several other features may appeal to consumers.
As for the CPI, it just doesn’t seem to be as important of late in comparison to the jobs data.
We have seen revisions downward over the summer to previously announced data.
The debate is whether this is an economy that is growing, but a slower pace, or an economy that is in trouble.
Whatever the interpretation, it seems the Fed is listening and a rate cut is coming next week.
I would think it would be 25 points and then let the election get done.
A sustained drop over the next 6 months in steps of a quarter point would move the rate closer to equilibrium.
That is to say that the rate less inflation.
To me we would need to take off about 1 percentage point.
You will hear others who want interest rates back at 0, but that is beyond the pale.
We have now had two back-to-back big pullbacks in the markets.
Last month we came right back.
This is September, however, and it may take a bit to recover.
I think though at the end of the year, we will be back near or above the recent record highs.
There is much out there to prove that theory false, but it seems to me that the economy is far from stalling.
It may not be as strong, but it is still moving ahead.
It does however not support multiples that we have recently seen in some of the Mag 7.
Of note is the broadening of the market, which is a real benefit.
We just don’t need all that concentration in so few stocks.
The other problem in the weeds is the amount of relative gambling in the market as it has done nothing, but go up for almost a year.
It would not take much to wash this out of the market, but it would be costly and scary for many.