Per Fed Watch, 93% chance of a .25 rate cut and a 7% chance of a .50 rate cut. Rates remaining the same is now, for the first time this year, at 0%. Last week odds stood at 27% chance of remaining the same.
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Agreed. I think this is why we are rallying. Or more accurately, why some parts of the market that have been left behind are rallying. Value, and small cap in particular are up heavy. Tech is about break-even today.
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Ya, every time I look at the Russell2000, it seems to be half a point higher. Now about 3.5% at the close. I should not have dragged my feet of buying some of it.
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Russell 2000 index (RUT) has now risen more than 11% in the last week.
From four days ago:
pauleckler: “Which stocks will benefit first?”
DB2: “Small caps, such as IWM, as we’ve seen in the last couple of days after Powell’s testimony.”
DB2
My expectation is IWM will hit $245 to $260. Even if you miss the initial move, still time to buy is my view.
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I can not tell what happens to the market next.
There are high risk assets that were not considered high risk. I am talking resource prices possibly moving down. I donno.
I do not like gold here. Crazy call as the market has been climbing.
Tech is mixed and in 7 instances ultra high.
The consumer is revving up? I think so but who knows?
The seasonality should be good into Christmas but this market is not rising from lows made this year.
It is kind of flat and churning. I have no other clear insights.
“Flat” is a crazy word for it. The swings are larger. That volatility of ups and downs is higher risk to the down side.
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This is not a money supply that supports a major rise in the markets.
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- What is happening since middle of last week is rotating out of Tech and moving into small caps, and regional banks and to some extent financials. The first two are clear beneficiaries of rate cut.
- In the link I provided I pasted a chart specifically comparing it to Oct 23. Oct 23 was Fed pivot not a rate cut and that spurred a rally and now we are looking at a rate cut and we should get a rally close to that level, if not more.
- Separately, regional banks and small cap has underperformed large cap massively and they are catching up
- Small caps have low PE of 12 and regional banks have strong balance sheet and I posted a list of regional banks with 20%+ excess capital as % of market cap, i.e., they can buyback 20% of outstanding shares without impacting their capital levels.
- I have posted about these for the last 2 to 3 months.
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Sounds good
The naysayers worrying about commercial property loans, what would you say to them?
I am not a naysayer.
First of all not all commercial property are same; The grocery store anchored retail space, medical offices, multi-family, industrial are good. Always there is an odd property which is financed with high leverage and cap rate shrinking might put it in distress, but they are going to recovery as high as 80 or 90 cents on the dollar on those cases.
Now, Office properties are different story. However, all money center banks have mitigated that risk, i.e., either they have reserved or not an issue. The only big bank to have some exposure is JPM and JPM has freaking strong balance sheet and can easily absorb even if the entire book goes to 0 which is around $30 B. Now, regionals are exposed to CRE, however many of them have mitigated. See my posts on this topic in Liquid Lounge.
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I am even less worried about office property because of something I read months ago about the schedule of possible defaults being extremely spread out.