Equity Market at a Critical Threshold

Time to sell some calls or raise some cash.

Highlights

• Yesterday’s FOMC meeting did not change our call for 2024: If the economy performs as the Fed expects, then it will still be cutting rates twice next year; if it underperforms as we expect, pencil in four

• The Fed appears too comfortable with the “soft landing” and is erring on the side of over- estimating momentum, but is ignoring headwinds from the negative fiscal impulse, strike action and gas prices

• Treasury markets broke out of recent ranges (10-year T-note closed at 4.4% and 2-year at 5.20%) and equities took a hit (Nasdaq down -1.9% and S&P 500 down -0.9%) with futures pointing to a weaker opening this morning

• A GDP recession is looming as there is a dearth of new home buyers who can afford to buy and seeing as GDP growth is all about new spending — and spending in residential real estate is non-existent