Short‑Term Downtempo: What’s Brewing?
The S&P 500 has been on a five‑day slide, a bit like a coffee that’s gone flat after the early espresso rush. That dip mainly mirrors the market’s reaction to two things:
- Both short‑term and long‑term Treasury yields jumped—the 2‑year sun rose to 3.79% while the 10‑year climbed to 4.33%. Investors suddenly sobered up on the idea that the Fed might squeeze the rate‑cut engine a tad later than expected.
- Futures are buzzing about the Jackson Hole Symposium—the place where the Fed can finally say “yes” or “no” to monetary easing.
Economic Pulse Check
July came with a mixed bag:
- Productivity prices soaked up 0.9%—a taste of stubborn inflation.
- Core CPI slipped 0.3%—still blowing the invisible hand of price pressure.
- Retail sales went up just 0.5%, and the Michigan consumer sentiment sheet hit a multi‑month low.
- Weekly jobless claims crept back up to a few months’ peak—so the labour market’s roar has dimmed a little.
All of this paints a picture where the economy isn’t weak enough to jump straight into rate cuts but also cooled enough that a “later‑this‑year” easing feels less outlandish.
Fed’s Dilemma: Calm or Cut?
The Wall Street Journal notes that expectations for a September cut have slipped from >90% to around 74%. The big question: Does Powell come out of Jackson Hole with a whimper or a boom?
- Dovish speech might stop the slide, sparking a rally as markets find the sweet spot of “wait for the rate cut.”
- Hawkish tone—firm on keeping rates high—could tighten the correction further, especially since the index’s P/E ratios are still on the high side.
What Corporate Earnings Say
Second‑quarter results are doing a mixed dance:
- Big‑cap tech giants beat expectations, pulling the index along.
- Industrial, financial, and consumer staple sectors look a bit flat—so the heavy lifters are shoulder‑to‑shoulder with earnings now.
Bottom line: the S&P 500 is dancing a lot to the tune of “Big Tech.”
Geopolitics: The Wild Card
The Russia‑Ukraine war is still a ticking time‑bomb, Middle East tensions are show‑stopping, and President Trump’s unpredictable foreign policy could jolt energy and industrial stocks whenever he chooses.
Summing It Up
That five‑day dip is essentially a look‑back at policy uncertainty. In the near future, the Jackson Hole reply and bond yields are the main drivers. On the horizon, the outlook remains breezy: No recession, steady corporate earnings, and a 2025 Fed easing possibility still intact.
