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In this relatively slow news day for the markets, we saw fairly bumpy trading today, with the Dow fighting itself in the green no fewer than four separate times, and a session low of -290 points, before closing -0.32% on the day — and this was the best performing of the four major indices. The S&P 500 more than doubled that loss, with 7 of 11 sectors closing lower, to -0.75%. The Nasdaq was the worst of the bunch, -1.04%, with the small-cap Russell 2000 -0.60%.
Without a lot of economic data or earnings results to guide us this Monday — we are back-weighted for both in the current week — we turn to public statements made by respected members of the world of finance and economics. At today’s National Association for Business Economics (NABE), both Chicago Fed President Charles Evans and Fed Vice Chair Lael Brainard had positive, yet practical, words for their economic outlooks: Evans continues to believe a recession can be averted, while Brainard admits we have yet to see the cumulative effects of Fed tightening in the market to this point.
Not so JPMorgan (JPM - Free Report) Chairman and CEO Jamie Dimon, who told CNBC today he expects another -20% drop in the S&P 500 before we’ve hit the bottom of this current bearish recessionary period, as he expects a hard landing for the economy. Considering we’re currently seeing the S&P trading at levels not seen since Thanksgiving Week of 2020, this is a dire warning indeed. Another -20% would bring the S&P to beneath 2900, and we haven’t been there since the first couple months of the Covid pandemic.
Time will tell which side is right, though both have a vested interest in making their respective claims: the Fed members because they continue to believe in the system of monetary policy they are putting forth, and the major bank boss because if he’s not considering possible worst-case scenarios, then he’s really not doing his job. But as market participants have generally considered us closer to the end of our monetary strife than the beginning, this bearish outlook for Dimon seems an outlier from this vista.
Bond yields on two-year and 10-year Treasury bills are staying at elevated levels, but aren’t moving much. The 2-year yield is currently at +4.31% while the 10-year is +3.88%, maintaining its roughly 40 basis-point (bps) inverted gap that we’ve now seen for most of 2022. Another thing Jamie Dimon said today was that he expects another 100 bps in Fed hikes before all is said and done, and based on where these bond yields are headed — namely, a 10-year cracking 4% and a 2-year perhaps reaching 5%? — this would seem to bear out when we look at the trajectory of the numbers.
This all said, numbers can change. Evans said today we might see inflation unravel as quickly as it built up, and if that winds up being the case, everyone will then have to reassess where they see the economy headed — even Jamie Dimon. A big downward surprise on CPI numbers this Thursday would be a good way to get such a ball rolling.
Image: Bigstock
Jamie Dimon: Hawk; Fed Members More Dovish
In this relatively slow news day for the markets, we saw fairly bumpy trading today, with the Dow fighting itself in the green no fewer than four separate times, and a session low of -290 points, before closing -0.32% on the day — and this was the best performing of the four major indices. The S&P 500 more than doubled that loss, with 7 of 11 sectors closing lower, to -0.75%. The Nasdaq was the worst of the bunch, -1.04%, with the small-cap Russell 2000 -0.60%.
Without a lot of economic data or earnings results to guide us this Monday — we are back-weighted for both in the current week — we turn to public statements made by respected members of the world of finance and economics. At today’s National Association for Business Economics (NABE), both Chicago Fed President Charles Evans and Fed Vice Chair Lael Brainard had positive, yet practical, words for their economic outlooks: Evans continues to believe a recession can be averted, while Brainard admits we have yet to see the cumulative effects of Fed tightening in the market to this point.
Not so JPMorgan (JPM - Free Report) Chairman and CEO Jamie Dimon, who told CNBC today he expects another -20% drop in the S&P 500 before we’ve hit the bottom of this current bearish recessionary period, as he expects a hard landing for the economy. Considering we’re currently seeing the S&P trading at levels not seen since Thanksgiving Week of 2020, this is a dire warning indeed. Another -20% would bring the S&P to beneath 2900, and we haven’t been there since the first couple months of the Covid pandemic.
Time will tell which side is right, though both have a vested interest in making their respective claims: the Fed members because they continue to believe in the system of monetary policy they are putting forth, and the major bank boss because if he’s not considering possible worst-case scenarios, then he’s really not doing his job. But as market participants have generally considered us closer to the end of our monetary strife than the beginning, this bearish outlook for Dimon seems an outlier from this vista.
Bond yields on two-year and 10-year Treasury bills are staying at elevated levels, but aren’t moving much. The 2-year yield is currently at +4.31% while the 10-year is +3.88%, maintaining its roughly 40 basis-point (bps) inverted gap that we’ve now seen for most of 2022. Another thing Jamie Dimon said today was that he expects another 100 bps in Fed hikes before all is said and done, and based on where these bond yields are headed — namely, a 10-year cracking 4% and a 2-year perhaps reaching 5%? — this would seem to bear out when we look at the trajectory of the numbers.
This all said, numbers can change. Evans said today we might see inflation unravel as quickly as it built up, and if that winds up being the case, everyone will then have to reassess where they see the economy headed — even Jamie Dimon. A big downward surprise on CPI numbers this Thursday would be a good way to get such a ball rolling.
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