S&P 500 recovered from weak Thursday close, and there were subtle clues (shared with clients) as to why interest rate sensitive plays (beyond Russell 2000) would do better than largecaps Friday – the whole week slated to be a strong one. Little wonder – rates were not protesting, and confidence in soft landing growing. All at the expense of the dollar – and the precious metals upleg I also called on to continue as this linked to premium analysis talking first a pullback below $2,500 proves.
Powell didn‘t disappoint the doves – I though personally wonder why such a degree of surprise when the time is quite right to do a victory lap around disinflation progress, and latest degree of revisions to job market strength facilitating dual mandate focus (acknowledgement of no longer tight, but stressed job creation). There comes the Sep rate cut promise via „time has come to adjust monetary policy stance“ line – with 100bp cuts 2024 being the base case, meaning only 75bp till Nov. Let‘s leave aside what BoJ could still do in the months ahead…
Which assets benefitted most in such a daily relief environment? Smallcaps, regional banks, industrial names and so much real estate associated alongside precious metals. Crude oil still deserves a second look. More thoughts about longevity of this macro environment facilitating the rally, are covered below – including my year end projection and path for S&P 500.