Home › Market News › Stock Market Hedges, The Great Rotation, and Bitcoin Futures
The Economic Calendar:
MONDAY: Chicago Fed National Activity Index (7:30a CT)
TUESDAY: Redbook (7:55a CT), Existing Home Sales (9:00a CT), Richmond Fed Manufacturing Index (9:00a CT), 2-Year Note Auction (12:00p CT), Money Supply (12:00p CT)
WEDNESDAY: MBA Mortgage Applications (6:00a CT), Building Permits (7:00a CT), Retail Inventories (7:30a CT), Wholesale Inventories (7:30a CT), S&P Global Composite PMI Flash (8:45a CT), New Home Sales (9:00a CT), EIA Petroleum Status Report (9:30a CT), 5-Year Note Auction (12:00p CT), Michelle Bowman Speaks (3:05p CT)
THURSDAY: Jobless Claims (7:30a CT), Durable Goods (7:30a CT), GDP (7:30a CT), Consumer Spending (7:30a CT), EIA Natural Gas Report (9:30a CT), Kansas Fed Manufacturing Index (10:00a CT), 7-Year Note Auction (12:00p CT)
FRIDAY: Personal Consumption Expenditures – PCE (7:30a CT), University of Michigan Consumer Sentiment (7:30a CT), Baker Hughes Rig Count (7:30a CT)
Key Events:
Our favorite medium to long-term macro regime combines GDP and inflation. We are watching the report on Thursday for any outlier data.
Source: Two River Analytics
STOCK INDEX FUTURES
The S&P 500 closed down 1.96% over the last five days. Seven out of the eleven sectors tracked in the image below also closed lower in the previous five days. Technology had the biggest decline, falling 5.53% over that period. Energy and Financials were the two sectors to close higher over the last five days, increasing 2.04% and 1.11%, respectively.
The stock market is now more focused on company earnings (profits) than on valuation metrics (like price-to-earnings ratios)
Why it’s Important:
Addressing a Potential Concern:
Things to consider as you try to protect portfolio gains.
The market is shifting its expectations from aggressive rate hikes to potential Fed rate cuts.
The Fed Funds futures market is pricing a 94% probability of a 25 basis point rate cut in September.
While the Fed acknowledges this possibility, it remains data-dependent and cautious. The economic data provides a stronger case for rate cuts than earlier this year.
Our baseline scenario suggests economic growth will pick up, limiting significant yield curve steepening despite potential rate cuts. The upcoming elections could introduce additional risks to the bond market.
Source: CME Fedwatch
Bitcoin has seen a significant price surge this month, up nearly 20% since early July. Some traders speculate that this rise is due to anticipation of a price boom triggered by former U.S. President Donald Trump.
This speculation follows Trump’s appearance at a Bitcoin conference and rumors that he might announce the creation of a strategic U.S. Bitcoin reserve. However, it’s important to note that these are just rumors, and there is no confirmation from Trump himself.
Oil prices broke lower out of their trading range on Friday, as traders will monitor the market’s macro backdrop this week.
There are concerns about slowing demand in China, fueled by recent economic data, which limit price increases.
There are also expectations of a constrained oil supply throughout the third quarter, which is preventing a price plunge too far to the downside.
This analysis is only based on the current Trump win probability of +75%.
Expect new tariffs in the next 12 months, which are more likely deflationary than inflationary.
The 2018 trade war occurred against the backdrop of strong global macroeconomics (US ISM and global PMIs @ 60, China GDP 7%) and low interest rates (Fed funds @ 1.25%).
2024/25 backdrop for tariffs is much weaker (ISM < 50, global PMIs @ 50, China GDP 4.7%, Fed funds @ 5.5%). New tariffs threaten a weak global economy with recession (tax hikes on the global economy + business uncertainty).
My favorite monitor setup is number 6 at the office and 9+1 when traveling.
These performance charts track the daily, weekly, monthly, and yearly changes of various asset classes, including some of the most popular and liquid markets available to traders.