Pre-Market Plan [9/16]: Jumbo Rate Cut Odds Increase
Good Morning -
The market staged a very powerful rebound last week following one of the worst starts to September that we’ve seen in years. Poor seasonality in September truly does live up to its reputation.
After the brutal selloff in the first week of September, many Semiconductor names traded my Bear Case (again) in my DCF Model. Seeing that probability may favor a relief rally, I sent Members a roadmap that NQ (Nasdaq-100) could see 19000 again by the end of the week (then, still 18400) but that anything further is a bonus. I then discussed that reclaiming 19600 on the Nasdaq would be a month-END goal.
….The market did the entire recovery sequence in ONE week….
Obviously, this rally has been very nice given that we were looking for a recovery and we indeed got one.
However -there is a new wildcard now that I have to consider. I’ve been in the camp that we get 25BPs for a rate cut. The odds of a 50BP cut rose on Friday to 50% after a WSJ article from Nick Timiraos (Chief Economist at WSJ) that discussed the possibility of a jumbo sized cut.
This morning, it appears that probability has risen to 65%…
This has implications for how asset allocation will play out if true.
In today’s note to Members emailed privately, I will discuss my thoughts on this.
We got the recovery sequence I was looking for. Has it gone too far ahead of FOMC?
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