The markets bounced back from last week’s sudden, sharp drop.
Stocks Rebound to Notch Best Week of 2024
A streak of encouraging economic reports buoys markets
By Sam Goldfarb, The Wall Street Journal, Aug. 16, 2024
…
Stocks began rallying in earnest Tuesday in response to data that showed that wholesale-level prices rose less than anticipated last month.
They added to those gains Wednesday after consumer-price index data also showed inflation cooling and surged again Thursday following better-than-expected reports on retail sales and jobless claims… [end quote]
The markets have baked in expectations that the Federal Reserve will cut the fed funds rate by 0.25% in September and that the economic soft landing will continue. Like other bubbles in history, any data that contradict the assumptions can cause sudden reversals and potentially a popped bubble.
This week’s Control Panel shows that the stock and bond markets quickly recovered their trends when a few new data points came in.
The trade is risk-on. The markets are bouncing back from Extreme Fear.
The Atlanta Fed’s GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2024 was 2.0 percent on August 16, down from 2.4 percent on August 15. After the housing starts report from the US Census Bureau, the nowcast of third-quarter real gross private domestic investment growth decreased from 0.0 percent to -2.4 percent. While this is still respectable growth and not recessionary it is a significant change. The economy is slowing.
Barring surprises, the METAR for next week is sunny.
Wendy