The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Recession concerns.
US stocks were bid in the premarket and the S&P 500 opened up a few handles and rallied to +15 early, rolling over shortly before 10 AM. US ISM Services data (50.1 vs 51.5 est & 50.8 prior) renewed the worries that the US economy might be in more jeopardy than bulls would like to believe. Bears took the index negative and we bounced off the lows around 10:50 AM. The index limped higher towards the afternoon. Yields didn’t change too much and FOMC rate cut expectations didn’t change much either. There’s a 94% chance of a 25-bip cut in September and total cuts for 2025 are 59 bips.
The ISM data shows the slightest level of expansion because it was greater than 50. The fact that it was only a tenth above 50 gave a lot of investors pause. That said, the equity market didn’t panic and the bond market didn’t act as those a recession was likely. The combined market reaction was one of modest caution versus repricing a new likelihood of economic weakness.
At this point, markets are not quite as brave as they were last month. They are also nowhere near as worried as they were in late Spring. We’re mostly convinced that the economy will expand and the bull will run. We’re just not *that* confident *today.*
Whether we need some fresh strong economic data or a political headline or some other catalyst to re-bolster the longs or to embolden the bears, I’m not sure. Probably we do. While every single dip in the past was a golden opportunity for buyers, markets *always* worry that things might be different *this time.*
So we’ll have to see. Maybe some bearish events turn the mood and the tape. Maybe some bullish ones send us toward new highs and the most common lament of the last 50 years, why didn’t I buy the dip?
See you tomorrow.
-Mike
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