My thoughts on the whole enchilada
Could write an entire book on this but will try to make it as short as possible as to not bore everyone to tears. For anyone that have followed my posts, you likely have sensed that I have started to "waffle" a touch on this pending but never quite getting here U.S. recession. I am now in full wafflidge mode. Was it the blow out September jobs, well not really, but it definately helped ice the proverbial cake. The data just remains too strong and despite what people like tj are espousing to the contrary I am not so sure you should follow (not that anyone would). Employment remains strong, consumers are still spending, GDP is still solid, earning ditto, guidence another ditto.
The two largetst economies in the world are in stimulative mode. How does this equate to recession? I have maintained too much cash over the last quarter but still remain extremely selective to put it back to work, maybe the seasonality of it all, maybe because it has just been very hard to find entry points as things keep climbing.
So where are we with rates? This may come as a shock here but I think we are pretty much where we should otherwise be right now, historically speaking. Will the Fed keep cutting? Well, yes and no. Yes because they should be getting a little "closer" to neutral, no because they really really don't absolutely have too (at least right now) last thing they want is to re-ignite inflation. I know I know, but a wee bit more patience will go a long way. Wages are climbing, thats a good/bad scenario and looking forward there still remains some inflationary pressures to be aware of as well, look no further than oil, even if it "may be" short lived. The positive offset is productivity gains have/can and still might offset this. To put it short, they will keep cutting but it will not be at break neck speed and that suites me just fine. Rates are fine even if they seem a bit high, it is the rapid pace up or down that causes the problems. Business and corporates will adjust and normalize and that includes reits, which have flurished at these levels and had continued to do so even in rising rate environment in the past, although some will certainly do better than others obviously dependant upon their own debt structure. We need to steady and normalize here, that will enable the soft landing everyone is speaking about and it will be a rarity.
Overall, I think we continue to melt higher at least into elections as I had suggested near the end of the first quarter and that has surely come to pass. There is and will continue to be more than ample liquidity to do so. As also noted earlier, it will likely be a good place to re-asses where we are at that point heading into year end which typically is a stronger time for markets. This doesn't mean we scream higher tomorrow, doesn't mean we can't pull back.
U.S. debt is/has and always will be the elephant in the room and will remain that way until the market forces the hand of the government to actually do something. As much as I have listened to both parties, nary a word of remedying this, only more spending, go figure.
Stay good,
DZ