monday, september 16th, 2024

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 broadcast summary (*Generated by ai, there may be some errors)

Key Takeaways

  • Federal Reserve expected to cut rates by 50 basis points, but potential for only 25 bps cut remains
  • Quad 4 economic conditions persisting, with gold up and copper down
  • Foreign currency positions (long Euro, long Pound) remain attractive as Fed appears more dovish than other central banks
  • Caution advised on equity markets due to potential volatility around Fed decision

Topics

Federal Reserve and Rate Cut Expectations

  • Market pricing in 50 bps rate cut, shift from 25 bps expectation last week
  • Potential for Fed to only cut 25 bps to maintain credibility
  • Concern that 50 bps cut could signal economic emergency
  • VIX setup not conducive to panic rate cut; bearish trend not yet confirmed

Economic Indicators and Market Conditions

  • Quad 4 conditions persist: gold up, copper down, 2-year yield testing 3.50%
  • China data shows continued slowdown: Industrial production 4.5% (from 5.1%), retail sales 2.1% (from 2.7%)
  • U.S. retail sales data coming Tuesday; potential for strong number before Fed meeting
  • Difficult base effects for retail sales in September and December 2024

Currency and Commodity Markets

  • Long Euro and Pound positions attractive as Fed appears more dovish than ECB and BoE
  • Bank of Japan unexpectedly hawkish, supporting Yen strength
  • Oil (WTI) showing lower high at $71.19, well below trend of $77.91
  • Silver "ripping" with potential to reach 5-year high above $32

Equity Market Dynamics

  • S&P 500 near all-time highs, but 8:1 downside vs upside levels
  • Tech sector up 8% last week after previous decline
  • Defensive sectors (utilities, real estate) outperforming tech over 3-month period
  • NVIDIA options activity suggests manipulation attempts

Investment Strategy

  • 10 short positions added, mostly into Friday's close
  • Caution advised on both upside and downside scenarios for Fed decision
  • Long positions in investment-grade credit (LQD, IGLB, IGSB) maintained
  • Signal Strength Stocks: changes include removal of RTO, SPHR, TGT; addition of DKNG

Next Steps

  • Monitor Fed meeting and rate decision on Wednesday
  • Watch for potential volatility in equity markets, especially NVIDIA
  • Assess retail sales data on Tuesday for impact on Fed decision
  • Consider defensive positioning and bond proxies in equity allocations
  • Evaluate opportunities in silver and other commodities showing strength