Market Recap:
Equities continued to rally in early September as investors anticipate a Fed rate cut. The S&P 500 pushed higher with momentum still concentrated in the large-cap technology stocks. However, breadth improved slightly as other sectors joined in the advance. At the same time, commodities and metals continued their upward trend.
What We’re Watching:
The Fed is expected to cut short-term interest rates this week and the most recent jobs report may have sealed the deal. The jobs report came in well below expectations as hiring slowed and the data was revised lower in previous months.
Inflation remains elevated, commodity prices are rising, and economic growth is slowing. As we mentioned in our update last week, this is how stagflation starts.
Chart of the Week:
The U.S. Dollar Index measures the strength of the dollar compared to a basket of major foreign currencies. Right now, the index is sitting on a long-term trend line that has held since the Global Financial Crisis. A clean break below this level could have broad implications including:
- Strong performance from commodities and metals
- Inflationary pressures increase
- U.S. purchasing power declines and import costs rise
