U.S. Futures & World Markets

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Stocks are slightly lower ahead of Fed Chair Warsh's speech in Jackson Hole at 10 AM ET. The CME FedWatch tool assigns a 36% probability to a 25-basis point rate hike at the September FOMC meeting.

Torsten Slok of Apollo puts the current rate regime in perspective: for 30 years, the 10-year Treasury yield fell almost entirely on the handful of days around Fed meetings. That stopped in 2022. With Warsh having dropped forward guidance, rates will become more market-driven. This looks less like a post-hiking-cycle anomaly and more like the new regime.

In other words, Jackson Hole may not give us a roadmap for September, but anything Warsh says about framework and the economy could move the long end anyway.

S&P Futures vs. Fair Value: -13.00  |  10-Year Yield: 4.69%

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Charts & Data

The US has the largest deficit in the world in GDP and dollar terms — even excluding the ballooning interest bill, it's wildly inappropriate for an economy at this stage in the cycle. Simon White, Bloomberg via Daily Chartbook.

Before Bessent's doubling move takes effect September 9th, expanded buybacks at longer maturities are already twice as large as last year — $40B YTD vs. $22B. @steve_donze via Daily Chartbook.

The 10-year Treasury yield is not unusually high relative to nominal GDP growth. No need to panic that the Bond Vigilantes are on the loose — yet. Yardeni Research via Daily Chartbook.

Rather than surging above 5%, the current US economic surprise index suggests the 10-year yield may soon fall close to 4.25%. Jim Paulsen via Daily Chartbook: the bullish case for bonds from here.

NAAIM active manager exposure climbed to 102.7 — the highest reading in over 2 years. Readings above 100 indicate use of leverage. Daily Chartbook: professional money managers are not just fully invested — they're leveraged long.

Retail has spent August buying semis and selling software, leaving positioning skewed against the emerging relative breakout in software. JPMorgan via Daily Chartbook.

With only a few trading days left in August, the equally weighted Software Index is working on its highest monthly close in history. JC Parets via Daily Chartbook: one of the most important technical developments of the summer.

SPX average absolute daily move following a Jackson Hole speech has been 1.03% vs. 0.63% on other August sessions. When markets react poorly, the downside tends to be much more severe. Tier 1 Alpha via Daily Chartbook.

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