Dispersion remained the theme, with the Dispersion Index still elevated. While it could rise further, it’s something to watch—high dispersion typically coincides with low correlations.
Outlook
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While widely anticipated, the real news about the cut was in the finer points made by Fed Chair in the post-meeting press conference. He said the move was essentially a “risk management” cut which confused investors a bit.
The enthusiasm for all things related to artificial intelligence is akin to that of the dawn of the internet, though many of the circumstances are quite different.
With Fed policy remaining highly data-dependent at this stage of the game, getting policy to neutral is a good starting point. If the upcoming employment data doesn’t improve, or gets worse, in the months ahead, then the voting members will more than likely front-load their rate cuts and get them in before year-end…then on to 2026.
It’s unusual to see both the Dispersion Index and the Implied Correlation Index up at the same time - but stock implied volatility is climbing faster than index-level implied volatility. This is likely because risk is being repriced.
Newsbytes covering the ruling related to the Argentina-based energy firm YPF, Bank of Japan and the landing of typhoon Kajiki in Vietnam and China.
On Thursday, softer private hiring data and rising layoff trends fueled hopes of an imminent Fed rate move, with the S&P hitting a fresh record close.
Markets are rebounding following last Friday’s turbulence as Wall Street looks to Fed rate cuts for enthusiasm ahead of critical economic data later this week.
This insight looks at recent Health Care industry underperformance in the context of its performance in the post-Covid period. It explores the idea that US policy uncertainty may be an additional short-term drag on the industry not just in the US but globally as well.
The market spent the session waiting for Nvidia, with hedges being put on throughout the day, which is why the VIX 1-day rose from around 8 to 15.
Chair Powell signals potential rate cuts, UK inflation remains high, Japan’s CPI surprises, and global data releases offer mixed signals on growth, sentiment, and monetary policy direction.
Inflation continues to give mixed signals, which can unsettle investors who anticipate the Fed adjusting rates at its September meeting.