U.S. Futures & World Markets
Stocks are fairly quiet as we head into the last week of summer. Geopolitical headlines are dominating the tape after the US struck Iranian launchers over the weekend. There isn't much economic data today, although we do get the August Employment Report on Friday.
After Warsh's slightly hawkish speech at Jackson Hole on Friday, investors will be anxious to see how the data impacts monetary policy expectations. A quote from Warsh: "For my part, today I am impressed by the overall performance of the economy, which appears to have strengthened. On that score, both Main Street and Wall Street have been remarkably resilient."
Fed Funds Futures are now pricing in even odds of two or three rate hikes over the next year. Let's see where the data and the bond market send interest rates over the next few months.
CORE Headlines
- U.S. struck Iranian launchers that were getting ready to fire mines in the Strait of Hormuz. Iran fired missiles at a U.S. base in Jordan in retaliation. — Axios
- China is helping fuel Americans' disapproval of data centers with bot accounts on social media. — Axios
- Profits are booming at the biggest US companies — corporate leaders say the bonanza is unlikely to slacken soon. — WSJ
- Bessent will ask G-20 countries to consider more trade barriers against China. — Reuters
- Bessent expects new secondary sanctions on Iran every week. — Reuters
- Warner Music and Sony Music file a lawsuit against Anthropic. — Axios
- Aon near deal to acquire USI Insurance from KKR. — WSJ
- Russia turning up the heat on Kyiv's allies with gray-zone activities across Europe. — WSJ
Charts & Data
Consumer sentiment fell in August despite cooling 1-year inflation expectations (4.0% from 4.2%). Bloomberg via Daily Chartbook.
Fed funds futures now imply a 58% chance of a 25bp rate hike in September — up from 35% the day before Warsh's Jackson Hole speech. CME FedWatch: a dramatic repricing in a single day.
The rolling 10-year annualized total return spread of stocks vs. bonds just cracked 15% — the highest since 1960, eclipsing even the 1929 high. Callum Thomas via Daily Chartbook: the most powerful argument for equities over bonds in modern market history.
Three-month intra-stock correlation in the S&P 500 has fallen to 0.1 — the lowest level in data going back to 1990. Truist via Daily Chartbook: an extraordinary environment for active stock selection.
S&P 500 up 3.45% since Memorial Day — on pace for the weakest summer since 2022, but still above the 50-year average gain of 2.6%. Bespoke via Daily Chartbook.
The worst Septembers have usually seen negative YTD returns heading in. The S&P is up solidly YTD — a historically favorable setup. Ryan Detrick via Daily Chartbook.
Mag 7 EPS grew 119% YoY in Q2. The Other 493 grew 32% — best since Q4 2021. The growth gap is expected to flip in favor of the Other 493 by Q4. FactSet via Daily Chartbook.
Gold options market has flipped from hedging the downside to chasing the upside. Goldman via Daily Chartbook: the sentiment shift in gold is as bullish as the price action.
Interesting Reads
- Druckenmiller Warning: The Bond Market Already Priced It — ZeroHedge
- Following this 3-hour rule before bed could support healthy blood pressure and blood sugar — Health
- 10 famous sayings from around the world — Dictionary
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