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Stocks Drop As Powell Delivers Vague Message On The Future Path Of Monetary Policy

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10/19/23

#Stocks – $TSLA

#Macro – $SPX, #Rates,

Mike’s Reading The Markets Macro Subscription Service on Seeking Alpha

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Today was one of those days when Jay Powell should have passed on its latest interview session. The message was vague, and he didn’t seem to have many answers at times. What is clear to me is that the Fed doesn’t know what comes next, isn’t sure how long rates may have to stay high, and doesn’t even know if rates are tight enough to bring inflation back to target. Inflation has come down a lot, and the labor market is showing some signs of slowing, but inflation at 3.5 to 4% is too high.

The yield curve is now quickly steepening, today rising to -17 bps. Some people think this is a recession sign, but I don’t see it that way. In this case, the 10-year is rising to the 2-year, not the 2-year, moving away from the 10-year; it is a big difference. As long as the 2-year rate stays anchored around the 5% mark, I do not think it is a recession warning. Once the 2-year begins to fall, it is a sign the market is starting to anticipate rate cuts; that is the recession warning. Right now, we have what seems to be a yield curve that normalizing.

The chart below shows the yield curve in September 2018, which is what a normal-shaped yield curve should look like.

Which means it could look more like this once complete.  Again, this is what I think is happening. Only time will tell.

So far, the S&P 500 futures have fallen and given back a large chunk of the gains from last week; I think we will see the rest of those gains go away, and the futures fall back to that 4,240 level for now.

Tesla fell 9% today and got back to $220, and this is an important spot for the stock, with support around $214; a breach of that level would not be good.

Sorry for being short. It is getting late.

-Mike

Charts used with the permission of Bloomberg Finance L.P. 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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