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It wasn’t an inspiring day. There was a lot of back-and-forth trading, followed by a late surge on news that the Trump team plans to rescind the Biden-era AI diffusion rule and replace it with something better. I’m not exactly sure what that means or what it will look like, but it’s probably no coincidence this news came today, as the public comment period on Section 232 for semiconductors ends today. Maybe “something better” means tariffs—I’m not sure.
The S&P 500 ended the day up about 43 basis points. There’s little to take away from today’s price action, except that the market seems more anxious than ever and is clinging to every Trump headline.
Liquidity conditions certainly haven’t improved much, but they were pretty bad initially. The top of the book remains below where it was before Liberation Day and below the levels seen at the end of last year. Unfortunately, it doesn’t take much to move the market these days, and that’s precisely what we’ve been witnessing.
“Uncertainty” was the word of the day at Powell’s press conference. He did his best to avoid answering any questions about the path of monetary policy, other than to emphasize that conditions remain highly uncertain. July Fed Funds futures are now trading at 4.265%, suggesting that the odds of a rate cut in July are below 50%.
Meanwhile, the 10-year yield dipped about three basis points to 4.27% on the Fed news. I’m not sure what happens next, but I still believe the bias is for rates to move higher. What does seem clear is that this consolidation phase appears to be nearing its end, potentially by May 15, based on the wedge pattern.
The dollar index rebounded somewhat today, but my guess is that the dollar still has further to weaken. The fact that rates haven’t fallen while the dollar remains weak suggests a market pricing in stagflation. Equities are the only part of the market that has yet to catch on to this.
Analysts expect both core and headline CPI to rise by 0.3% in April, while retail sales are projected to increase by just 0.1%. Next week could be critical for the stagflation narrative, especially if initial and continuing jobless claims are higher than expected tomorrow.
-mike
Terms By Chatgpt
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Core CPI – Consumer Price Index excluding food and energy prices. It’s used to gauge underlying inflation trends by removing volatile components.
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Headline CPI – The full Consumer Price Index, including all items. This reflects overall inflation.
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Retail Sales – A measure of total receipts of retail stores. It serves as a key economic indicator of consumer spending.
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Stagflation – A rare economic condition characterized by slow growth, high unemployment, and rising prices (inflation).
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Initial and Continuing Claims –
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Initial claims refer to new applications for unemployment benefits.
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Continuing claims are those who have already filed and are receiving unemployment benefits.
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Basis Points (bps) – A unit equal to 1/100th of a percentage point. So, 43 bps = 0.43%.
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Fed Funds Futures – Financial contracts that represent the market’s expectations of future interest rate movements set by the Federal Reserve.
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Top of the Book – A market term referring to the best available bid and ask prices for a security.
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Wedge (Pattern) – A technical analysis term describing a chart pattern that signals a potential price breakout.
This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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