(Justin Vaughn, Editor, Options Trading Report)
The markets Monday and Tuesday flowed aimlessly, neither gaining nor losing ground significantly..in anticipation. Investors’ and traders’ moods show no signs of direction, not affected by scattered earnings reports and future tightening by the Fed. And then Wednesday’s announcement came-soothing investors and traders alike and…with ‘good news.’ The July report showed inflation backed down to 8.5%. Six-tenths of a point sent the indices reeling…and up. The Nasdaq led the charge, surging 2.89%, while the Dow Jones Industrial Average and the S&P 500 followed with gains of 1.69% and 2.13% respectively, as investors and traders felt at ease with the ‘number.’ Interestingly, the heavy-tech Nasdaq Composite, according to the Wall Street Journal, has entered a ‘bull-market as the exchange has appreciated nearly 20% since June. Both the Dow Jones Industrial Average and the S&P 500 have surged upwards 15% and 11% respectively in the past couple of months. Hopefully, the ‘tide-is-turning’ as many indicators are reflecting positiveness. Even the 8.5% inflation rate for July was a step in the right direction, as more tightening is needed to keep the control headed downward. Many economists were expecting the July figure to be 8.7%. A significant contributor to the inflation equation is gasoline. Prices at the pump have consistently dropped for over seven weeks after peaking in June. Of course, crude oil prices also contribute to that equation. The 10-year Treasury and the two-year Treasury, both plunged 12 basis points to 2.76% and 3.17% respectively. “This is a step in the right direction but keep in mind we have many miles ahead of us before inflation normalizes,” said Mike Loewengart, managing director of investment strategy at Morgan Stanley, He adds, “one month’s data point does not make a trend, however, so cautions optimism is likely the name of the game.”
The Digital Dollar is poking Its Head… Many lawmakers are scrambling to pressure the Federal Reserve to move quickly to ‘present’ a digital dollar. Pressure from China appears to be the impetus, along with several other countries that are on the cusp of inception. The digital dollar is unlike cryptocurrency, which is not backed by the Fed, whereas the digital dollar would be backed. Jerome Powell has taken a more laid-back stance, adding that he feels it is very important in bringing the digital dollar to the forefront as the dollar is a leading integral player in global financial markets. He also is looking for political support before jumping in the foray. Mr. Hill, the Arkansas Republican, said his concerns were animated in part by China, which began real-world testing of its own central-bank-issued digital currency in 2020. “We should be concerned about China’s predatory practices,” he said. China’s oppressive position brings concern to many lawmakers, one of which is Rep. Jim Himes, (D., Conn.), commenting , “I do feel some urgency because other countries are moving ahead.
Crashing Crypto is fighting for survival… as cryptocurrencies face robust rules and regulations. Some have compared the trading of cryptocurrencies functioning without proper guidelines as the ‘wild west’ of markets. As Bitcoin has fallen from a lofty high in November of 2021, reaching $65,000, and of recently trading in the $24,000 range, nearly all cryptocurrencies have followed suit, many of which are hanging on for survival. As this debacle shakes out, survivors will emerge and some will not prevail… again in a fledging industry.
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RUMBLINGS ON THE STREET
Henry Kaufman, former chief economist of Salomon Brothers, known as Dr. Doom, for his influential and prescient forecasts of rising inflation and bond yields during the 1970s. Kaufman’s shift from making doleful predictions set off a bullish stampede. Barron’s “Today you have a man of much milder behavior who is not an aggressive mover on monetary policy,” Kaufman says, referring to Fed Chairman Jerome Powell. Randall W. Forsyth (Writer, Barron’s, commenting on Mr. Kaufman’s remarks), “forty years on, Kaufman may no longer be Dr. Doom, but he still retains his characteristic caution.”
Mark Kolanovic, JPMorgan chief global strategist, arguing that much of the bad news in economic data has already been priced into stocks. Barron’s “We believe that the risk-reward for equities is looking more attractive as we move through the second half.”
Karim Chedid, an investment strategist at BlackRock, WSJ “What we infer from the bond market is that investors are positioning for a slowdown.”
Wiley Angell, chief investment officer at Ziegler Capital Management, WSJ “If we do technically get into a recession, I think it’s more likely to be shorter-lived and less severe because both the consumer and corporations are well suited going into this recession.”