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September broke the statistics
September ended up breaking the statistics, with the SPY closing 1.3% positive, when it’s typically the worst month of the year. The same happened in the crypto market, where BTC historically falls almost 6%, but ended up gaining 12%, and so far this year, it's up 50%.All of this has been driven by the Fed’s rate cut momentum, upcoming elections, and labor market data on the way.
Strong rate cut and doubt
The Fed decided to cut the interest rate by 0.5. Are they afraid something will break with such a strong cut? It raises some suspicion; we’ll see how the market reacts, but initially, the SP500 is leaving a dangerous wick after reaching a high. Ambiguous market profile: record wealth, and stocks at ATH, but inflation persists, housing sales are falling, and bankruptcies are rising on the other hand.
NVDA exceeded expectations but is still down 6%. There are still opportunities, but be cautious heading into September.
Rate cuts have been confirmed, but September is also approaching, which historically has been the worst month of the year for the indices. There's significant uncertainty, especially with the elections on the horizon. Pay attention to how things are developing, particularly with the news.
Rate cuts are finally on the horizon; the question now is by HOW MUCH
We just came off the best week of 2024 for the indices, including the Nikkei. Gold reached a record price, and the market added $3 trillion in value from its lowest point earlier this month. By Tuesday, the SP500 had seen eight consecutive sessions of gains.Now that we have confirmation of rate cuts, what will drive the market with greater volatility will be news indicating HOW MUCH the rates will be cut. For example, news related to the labor market— the weaker it is (more unemployment), the more likely we are to see aggressive rate cuts. So, it's important to keep a close watch.
BIPOLAR Market: One week pessimistic, the next week optimistic.
The market sentiment is shifting week by week with each set of data—one week pessimistic, the next bullish, and so on. The index has recovered all it lost and closed the gap created on Black Monday. Inflation has dropped to its lowest level since 2021. This high volatility is leading investors to demand more fixed-income assets like bonds.
Strong Drop and Strong Recovery in the Markets
We had a week that began with a Black Monday after the Bank of Japan decided to raise interest rates for the first time in 30 years, from 0% to 0.25%. This triggered significant panic in the markets.This situation highlights the carry trade we discussed in a YouTube video. Essentially, investors were obtaining loans at extremely low rates (0%) and investing in T-bills and other riskier assets that offered higher yields. However, when there is a change after 30 years, and rates rise—even if only to 0.25%—it suggests a shift in trend. As a result, investors begin to reallocate their debt in response to the rate hike and start selling. This selling pressure forces other financial operators to rebalance their portfolios, leading to further selling and creating a snowball effect.Following the largest single-day drop in the SP500 since 2022, the index made a strong recovery, marking the biggest rise since 2022 as well. It’s important to note that, unlike Japan, the U.S. is looking to lower interest rates.