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M Notes:  Mon, 9-28 Thumbnail

M Notes: Mon, 9-28

Week Close: 
+ (-)%

Markets were mixed last week as Tech rebounded a touch.

The S&P roller coaster last week:  Down, up, down a lot, up, and up a lot.

So why has market volatility returned?   Let’s look at two pieces:  economic activity and economic policy.  Economic activity has been modest according to the Fed’s most recent Beige Book.  But it’s well below pre-Covid levels.  Economic data is mixed.  Housing has been really good, but small business and service industries have been really hurt.  That leads to Economic policy.  Two pieces there: monetary policy comes from the Fed, and they are being very accommodative.   The earliest we might see them raising rates (from only +0.25%), suggesting the economy is still in a fragile place.   Fiscal policy comes from Washington and the election is now just five weeks away.  There are two very, very different economic perspectives which leads to “uncertainty” about where fiscal policy might be headed.  Hence the return of the roller coaster.  

Durable goods:  Forecast was for a normal +1.5%, but the number only came in at +0.4%.  Still the fourth positive month in a row.  Context:   March -16%; April -18%; May +15%; June +7%; July +11%; and now August +0.4%.

Housing Existing homes sales were up +2.4% in August and are up +10.5% YOY.  New homes sales were up +4.8% in August and are up an amazing +43.2% YOY.

Jobless claims:  They came in at 870,000.  That’s the 5th time in the last 7 weeks the number has been below 1,000,000.  It appears we are solidifying between 800,000-900,000.  While better than where we’ve been, it’s still 4 to 5 times higher than the recent historical norm. 




Focus of the week:  The first Presidential debate is tomorrow night (9/29) at 9p here in Cleveland.  The economic policy of Trump and the economic policy of Biden is very different.  I’ll be listening to see if either candidate gets beyond talking points.

Indicator focus Consumer confidence (Tue); the final Q2 GDP read, ADP’s employment report (Wed); ISM manufacturing index, jobless claims (Thu); the latest jobs and unemployment numbers (Fri).