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A FEDERAL RESERVE THAT IS LACKING A STRONG CONSENSUS

INTC led a rally in tech stocks sending the averages modestly higher.  NVDA announced it would invest $5 billion in INTC causing shares of this beleaguered chipmaker to surge 30%, the greatest advance in four decades.

Long dated Treasuries, however, sold off following the headlines that weekly jobless claims dropped the most in nearly four years, suggesting companies are still holding onto workers.  Weekly claims are notoriously volatile thus more attention should be focused on the four-week moving average.

The Federal Reserve “dot plot” or the personal outlook of each member of the FOMC, penciled in a “weak” outlook of potentially two more interest rate cuts this year.  Almost half of the 19 member FOMC expects just one or no more cuts this year, the result of rising inflation and economic growth.  One participant (views are anonymous) believes the fed funds rates will be higher at year’s end than it is now.  Six shows no additional cuts in 2025.

Wow!  Talk about dissention.  Has the political interference affected the Committee’s perspective?  Nothing is ever political, to believe so is naïve at best. 

The 10-9 split (nine members see one or none and 10 see two or more cuts by year’s end) suggests that the path of monetary policy is contingent, not pre pre-ordained and the market will trade based upon the incoming data rather than a neat one-way narrative.

Writing it differently, the FOMC is not sending a single message.  It is sending two credible messages at the same time where volatility may increase based upon the released data, data that many believe is suspect for a myriad of justified and unjustifiable reasons.

Wow!  Another level of uncertainty.

What will happen today?

Last night the foreign markets were mixed.   London was up 0.02%, Paris up 0.22% and Frankfurt down 0.25%.  China was down 0.30%, Japan down 0.57% and Hang Seng up 0.01%.

Futures are flat.   The 10-year is off 9/32 to yield 4.14%.

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Kent Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.