Stock markets surged higher this week driven by improving economic growth prospects and a liquidity impulse. The latter being, of course, the Fed starting to cut interest rates again. Stocks appear set for a rally into year-end.
There’s been a lot of angst lately about weak payrolls figures and a declining labor market. Let’s set the record straight: The labor market is not as bad as everyone thinks. If you are taking labor market datapoints at face value, that will lead you to the wrong conclusion; which is why context is so important.
This week’s FOMC meeting is another piece of the puzzle. The Fed has officially pivoted to supporting the economy, despite what appears to be accelerating growth and elevated inflation. This sets up for a potential “blow off top” as risk assets are swamped with liquidity. In this post, we discuss how to capitalize on the opportunity.
The rest of this article is for premium members. Today’s post covers:
September FOMC meeting
Economic data strong
Flows and positioning
Liquidity fuels the equity market bubble
Chip trades in the money
Our portfolio
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