Looking Sideways – by Justin Vaughn

(Justin Vaughn, Editor, Options Trading Report)

“Proceed Carefully”…..words of caution, spoken by Jerome Powell, Federal Reserve Chair, at the ‘hallowed’ meeting of the Federal Reserve presidents from sectors in the United States, in Jackson Hole, Wyoming. Referring to the path of increases, Mr. Powell chose his words carefully, leaving the rate hike topic on ‘the table,’ but ready, giving the market little solace. It is a ‘strong-bet’ that inflation has throttled back. Mr. Powell will back off a September hike, with October likely to see a boost if numbers don’t show improvement. Coming this week Thursday and Friday the PCE (Personal Consumption Expenditure report), and the ever important Jobs Report. Both are valuable, showing the pulse of what consumers are spending on goods and services, and illustrating hiring, unemployed workers, and wage strength. These significant indicators present good evidence of the condition and direction of the economy. After a dizzying month of August, stocks and equities alike are regrouping, staging a modest comeback, hoping to get back on the side of the ‘bull.’ The Dow Jones Industrial Average finished up 293 points Tuesday, while the technology heavy Nasdaq Composite was up 1.9%. Treasuries received more interest as yields were still tempting. The Benchmark 10-year Treasury note was off slightly, but still partying 4.21%- down from 4.20%. The two-year note down from a lofty 5.048 on Monday, closed at 4.888% on Tuesday. Grace Lee, senior portfolio manager at Columbia Thread-needle Investments commented: “At some point the relative attractiveness of the stocks that have been left behind becomes so great that you can’t ignore them.” The inflation cloud continues to drift over the market, dampening investor enthusiasm, shutting down rallies early on. Even the ‘hot tech’ sector rally in the first half of 2023, up 42%, compared to 17% upside for the S&P 500 is not enough to stabilize and hold the overall market. Wednesday’s market was for a time, heavily influenced by the GDP announcement as the data showed a 2.1% rise in the second quarter, lower than the estimated 2.4%.

Thursday’s finish had all indices floundering, with the Nasdaq finishing up a bit. The finish of August, in the negative, broke the five-month run on the positive. The PCE report (Personal Consumption Expenditures report) released early Thursday morning showed inflation has throttled back a slight bit. The market seemingly had anticipation, to a degree, that inflation is backing off.

Another Coup in Africa, as unstable and corrupt governments give way to the most powerful military. Europe & the United States have supported many African countries monetarily, economically and even clandestinely, only to see their efforts thrown aside in an overthrow, a coup. President Ali Bongo, Gabon’s president was put under house arrest by his trusted general of his guard, entrusted to secure his safety. General Brice Clotaire Oligui Nguema removed President Ali Bongo, and immediately claimed the presidency. The sixth Coup d’etat in the past six years, Gabon, a former French Colony, and a “Western’ military alley,” is now in the hands of the left-leaning military general. Gabon, a country rich in natural resources, with a flourishing economy, and a per capita that leads the entire continent of Africa. Just five weeks ago Niger’s president, Mohamed Bazoum, was removed by a military junta, and thrown aside, while Russia lurks in the background ready to step in supporting the new regime with military hardware and economic needs.

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RUMBLINGS ON THE STREET

Dimple Gosai, head of U.S. ESG Strategy at Bank of America, Barron’s “North America is going to be the epicenter for EV-related investment, with twice the growth rate (of investment) in China. The investment has skyrocketed and is still unraveling,” alluding to the massive spending capital that has risen for the 9th straight quarter in this year’s second quarter.

Christopher Waller, Fed Governor, speaking in July, Barron’s “Pausing rate hikes now, because you are waiting for long and variable lags to arrive, may leave you standing on the platform waiting for the train that has already left the station,” Wallerr said at the time.

Kristin Forbes, a professor at the Massachusetts Institute Technology, Barron’s “You don’t want to commit when you just don’t know.”

Charlie Ripley, senior investment strategist for Alliance Investment Management, WSJ “There’s a little bit of a cloud of uncertainty that’s looming as we go forward from here. There’s some uncertainty around the road ahead and the path of policy which is leaving a little optionality for the Fed.”

Robert Frick, corporate economist at the Navy Federal Credit Union, WSJ “The labor market is moving back to average,” said Mr. Frick. “Many industries are all hired up.”