Market Commentary
Stocks and bonds were mixed as we headed into a Fed decision week. The tech-heavy Nasdaq is underperforming its counterparts. Oil is up and yields are little changed.
The Federal Reserve is set to cut interest rates this week for the first time in four years, marking a significant shift in policy. Investors are now closely watching to see how aggressive Jerome Powell & Co. will be with rate cuts. Recent reports in financial media indicate that policymakers are still undecided between a 25 basis point or 50 basis point cut on Wednesday. This uncertainty has fueled speculation, driving the odds of a 50 basis point cut from 30% a week ago to 60% today. Such indecision heading into a Fed meeting is unusual, suggesting a higher likelihood that the Fed will aim to clarify its intentions, potentially through signals via the financial press.
The S&P 500 experienced a sharp decline of 4% two weeks ago, only to rebound with a 4% surge last week, highlighting the rapid and volatile market conditions. Recent trading has seen swift rotations, with investors shifting away from tech mega-caps and into broader sectors of the market. This movement has driven outperformance in economically sensitive stocks, fueled by expectations of potential rate cuts ahead.
Our Newton models have favored a risk-off stance recently, but on the margin are showing some better reads. The biggest jump has been in Large Caps and Growth areas of the market. Although technology moved quickly from a 4 to a 14, Defensives and Real Estate are still on top.
Economic Releases This Week
Monday: Empire State Manufacturing Survey
Tuesday: US Retail Sales, Homebuilder Confidence
Wednesday: FOMC Interest Rate Decision, Jerome Powell Press Conference
Thursday: Initial Jobless Claims, Existing Home Sales, US Leading Economic Indicators
Friday: None Scheduled
Stories to Start the Week
Trump is safe and a suspect is in custody as the FBI investigates another ‘attempted assassination’.
Disney and DirecTv struck a deal to restore ABC, ESPN, and other networks.
“Shogun” had historic wins in an epic 18-Emmy first season.
What is Newton?
Our Newton model attempts to determine the highest probability of future price direction by using advanced algorithmic and high-order mathematical techniques on the current market environment to identify trends in underlying security prices. The Newton model scores securities over multiple time periods on a scale of 0-20 with 0 being the worst and 20 being the best possible score.
Trend & level both matter. For example, a name that moves from an 18 to a 16 would signal a strong level yet slight exhaustion in the trend.
Technical trading models are mathematically driven based upon historical data and trends of domestic and foreign market trading activity, including various industry and sector trading statistics within such markets. Technical trading models, through mathematical algorithms, attempt to identify when markets are likely to increase or decrease and identify appropriate entry and exit points. The primary risk of technical trading models is that historical trends and past performance cannot predict future trends and there is no assurance that the mathematical algorithms employed are designed properly, updated with new data, and can accurately predict future market, industry and sector performance.