Risk-On Trade Hits the Pause Button Ahead of the Fed

The S&P 500 snapped a six-day win streak ahead of today’s Fed meeting

Highlights

• The S&P 500 snapped a six-day win streak ahead of today’s Fed meeting

• Corporate earnings reports emphasize the impact of uncertainty

• The low savings rate is unsustainable, suggesting mean reversion

• Europe’s Q2 GDP surprises to the upside, supporting the euro

Key Takeaways

• Profit-Taking and Bearish Data Pause the Risk-on Trade: The U.S. risk-on trade is seeing a round of profit taking (snapping a six-day winning streak in the S&P 500). Gold prices popped and bonds enjoyed their best rally since June 4th (no buyers’ strike at the 7-year auction; 10-year T-note yield sliced below all major trendlines). All this at a time when a raft of economic data showed exports, home prices, consumer buying plans, job openings, and hirings all declining.