But still asking: Why cut now? Why so deep...?
The September 22 edition of Notes From the Rabbit Hole (#828) had some things to say about the FOMC action last week, before putting its tin foil hat back in the closet, getting down to the business of managing markets
The FED held off, held off, held off some more, writes Gary Tanashian in his Notes from the Rabbit Hole.
It held rates at a high level for meeting after meeting, despite the fade in inflation signals that we've expected (and now seen) since Q1 2023 (Goldilocks), unemployment that has long-since based and turned up, and despite the fact that it has been government itself – along with embedded and lagging services industries – that have kept the employment numbers afloat.
This is leaving aside the fact that BLS has revised these headline numbers down. This begs the question, why even pay attention to Payrolls as initially reported?
It begs another question. Why cut now, and why cut by an attention grabbing 50 basis points? Why did a President barely in possession of his faculties weigh in and protesteth too much, only to be caught in a lie (or a mental lapse) about having sat with the Fed Chief? Why?
Maybe because new highs for the S&P 500 at a strategic pre-election juncture supports our long-held bull view of "to or through the election".
Chart of the S&P500 index. Source: NFTRH
Putting the tin foil hat aside, let's be clear on a couple things.
I have consciously kept my tin foil hat in the closet since initially falling down the Rabbit Hole in the 2002-2004 time frame. Back then came a greenhouse, organic/heirloom gardening (well, an attempt, anyway), 20-year food supplies, a generator, wood stoves and gold, guns and ammo.
A lunatic? Sure. I went that way for a period in time. But for 20 years now I have been working at being even keeled, tuning down the paranoia and simply viewing modern life as it is and hence, modern markets as they are (not how my tin foil hat advised that they are, or how I wanted them to be).
The other point I want to make clear is that I am no Trump supporter. It probably should be re-stated because I've been making plenty of loaded statements (based on the facts of the employment data, the fiscal stimulus operations, etc) about the Biden administration and the Democrats' apparent initiatives to keep the White House.
But those who knew me in 2016-2020 time frame know all too well that I probably went overboard making fun of, criticizing and debunking the lies of the orange man.
My job is to tell what I see; my interpretation of the truth. It is not to support either decrepit political party or add to the disinformation that is now the norm, thanks to social media and the divisions getting ever more pronounced in society.
So let's leave it at this:
For whatever reason, the Fed chose to hold off until this point of the final lap toward the election and you can see above the immediate reaction. What' more, the SPX chart has now been shoved upward from a triple top structure to a breakout structure.
Could fail tomorrow. Could gain energy and power "to or through the election". Funny how this story comes together in line with our ongoing thesis, eh? Or maybe it's not so funny.
