There are many wise sayings out there… One of my favorites is by Will Rogers: ”Even if you’re on the right track, you’ll get run over if you just sit there”… That’s what I’d be thinking if I were Powell… Patience may be a virtue but time is also a luxury that he doesn’t have… With the government shutdown veiling the Fed from key economic data, JP is essentially trying to hit a bullseye in the dark. But let’s not forget what got us here. Slow and steady wins the race, right? Good things come to those who wait, and Rome wasn’t built in a day…
But what now, Powell?... Well, I’d supposed he’s more nervous than a cat in a room full of rocking chairs. Jumpier than a frog on a hot skillet. Like a turkey the day before Thanksgiving… as if the Fed’s next move was already a high-wire act. But now, with limited visibility and rising stakes, Powell’s not just threading a needle in a hurricane, he’s got to herd the cats we call ‘market reaction’ while doing it…
Even if Confucius were writing this market update, without key economic data, it’s truly hard to see into our future for where the economy is headed. However, gleaning where we did leave off, let’s not forget the shockingly low ADP print (last Wed) showing private payrolls lost-43k jobs in September. August was also revised from +54k down to -3k. OUCH, that’s gonna leave a mark… We’ve always felt that the correlation between ADP and NFP (Non-Farm Payroll) wasn’t in lockstep, but it’s hard to imagine THAT big of divide given how starkly low that number posted at. Furthermore, if Powell doesn’t get to see NFP, and CPI, can you really risk hoping things are bouncing back accounting for the recent trend? Given that backdrop, the market has already ruled a 95% chance of a cut is the most likely outcome at the next Fed meeting (assuming the shutdown persists through the weeks leading up to October 29th)
Yes, the Fed meets Oct 29th… two days before Halloween… Yes, I do see the irony in that… and yes… regardless of shutdown… On a full moon, a silver light will cast down across the marble steps of the Eccles building as Jerome Powell will once again rise from the ashes and… sorry, got to save my Halloween material for a later writeup.
The next meaningful data point likely to draw attention comes this Wednesday, when we’ll receive the Fed Minutes.. Until then, we wait…like a cowboy at a vegan barbecue, wondering what’s on the menu… What happens if the government stays closed longer than the markets are already expecting?? Well, we will have to cross that bridge once we get to it… assuming it hasn’t been closed by the shutdown too.
10yr: Note the extended downward trendline intersecting with the 4.15 level… That could bode well as support if it holds us here. It also sets us back up for a retrace back lower toward 4.0%.