Hey, Risers!
Standing pat.
The Federal Reserve hogged the spotlight this week, choosing a wait-and-see approach in its fight against inflation. Investors worried that the central bank will need further convincing before rates can be cut and the party can start anew. A hawkish pause, inflation risks and higher for longer rates remain markets concerns.
99rises performance: Our three main long-short blocks are flat to up in 2023 after outperforming the Nasdaq 100 Index by 23-38% in 2022.
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Economy & Markets
Unexpected.
Too Good
The Federal Reserve left interest rates alone as expected at its September meeting, but Chair Jerome Powell’s remarks make it clear that inflation worries remain front and center. “We’ve seen progress,” he said, noting however that “we want to see convincing evidence, really, that we have reached the appropriate level.” Powell also noted that the strong consumer and economy could mean more needs to be done to achieve 2% inflation.
Our take: Broken record time, but the inflation fight is far from over.
House Call
Housing market data was broadly weaker than expected, with housing starts falling by 11% from last month vs. forecasts of less than 1%. Existing home sales were also disappointing, falling 0.7% vs. expectations for a minor increase from last month.
Our take: Lag effects and higher for longer don’t mix.
Work Out
Initial jobless claims dropped to 201,000 this week, much lower than economists’ estimates of 225,000. This is the lowest number of new claims since January.
Our take: We repeat: A strong job market stands in the way of lower interest rates.
Learning Block: Cloward-Piven Strategy
Navigating Societal Shifts
While we are not political science experts, we observe a noteworthy phenomenon that resembles the Cloward-Piven strategy unfolding in today's world.
The Cloward-Piven strategy, which seeks to overload the welfare system to instigate political change, could have significant implications for today's markets. If implemented, it may strain public finances, potentially leading to higher government spending, budget deficits, and concerns about fiscal responsibility. Such fiscal pressures can affect the bond market, leading to higher interest rates.
Three trends that worry us:
Government Stimulus Programs: The COVID-19 fiscal stimulus could be seen as a government response aimed at addressing economic inequalities and social challenges.
Universal Basic Income (UBI): Debates over UBI experiments could be considered a partial reflection of the idea of expanding welfare programs
Rising Income Inequality: A broader societal desire for more equitable wealth distribution could have the potential to impact corporate profits and investor sentiment.
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