Rate cuts are finally on the horizon; the question now is by HOW MUCH

MOTIVATION
Quote of the week

"No hay atajos para alcanzar la grandeza, solo pasos consistentes y dedicados."

- Desconocido -

Week of 19/08/2024
What You Need to Know This Week

• Last week was the best week of 2024, with the S&P 500 rising 4% and the Nasdaq increasing by 5.2%.

• There is a 76% chance of a 25 basis point rate cut in September.

• Twitter has ceased operations in Brazil.

• The Nikkei experienced its best rally since COVID, rising 3.6% in one week.

• Gold reached a record price.

• The market added over $3 trillion in value since its lowest point earlier this month.

• The S&P 500 is enjoying its best streak of the year.

• The top 5 companies in the market now represent 29% of the index, compared to 18% during the dot-com bubble.

• By Tuesday, the S&P 500 had achieved eight consecutive sessions of gains.

• Concerns ahead of Powell's speech on Friday caused the SPY to drop sharply on Thursday, but weak labor data increased the likelihood of a rate cut.

• The announcement of a rate cut is finally here. Will it be 25 or 50 basis points?

23/08/2024
Reflection on What Happened and What Could Happen

Finally, Powell stated that interest rates need to be cut, but it remains uncertain whether it will be by 25 or 50 basis points (i.e., a reduction of 0.25% or 0.50%). This will likely be determined by upcoming employment and inflation data.

Many are starting to believe that the cut should be more than 0.25%. However, I wouldn't rush to conclude HOW MUCH.

As we mentioned, once it was confirmed that the labor market was weaker than expected—following the discrepancy of over 800,000 jobs in the March report—it was anticipated that they would finally announce a rate cut, which Powell did at the Jackson Hole symposium today.

The market reacted quickly with a sharp uptick, followed by a subsequent drop throughout the day. However, as of now, it is rallying strongly toward the end of the session.

You can see how it reached a peak, followed by a quick drop for the rest of the day, but by the end, it is once again trying to reach that maximum.

Next week, as noted in the section below, we have important unemployment data coming up, so stay alert.

Economic Calendar 26/08/2024

Economic Events

Next week is packed with important events, particularly related to employment and inflation, which could significantly impact the market.

Random
Random fact of the week

Did you know that octopuses have three hearts? Two of them pump blood to the gills, while the third pumps it to the rest of the body. Interestingly, when an octopus swims, its main heart stops beating, which is why these creatures prefer to crawl rather than swim to conserve energy.

Art
Ilustration of the week