Wall Street’s make or break moment in just days away.
In fact, later this week, Federal Reserve chairman Jerome Powell will deliver his remarks at the Jackson Hole Symposium. Should he fail to address the stock market’s wild swings, the bond yield inversion, or hint at deeper cuts, some analysts believe the reaction could be “violent.”
“We could see another plunge in rates. We could see further movement down in yields and the yield curve and more volatility and problems in the markets. He should move aggressively,” the Bianco Research president James Bianco told CNBC.
However, even though the market is desperate for another, deeper cut, it may not be warranted.
Part of the reason for that is a stronger U.S. consumer.
After all, despite all of the chaos, consumers continue to spend.
Remember, July 2019 retail sales jumped 0.7% month over month. Excluding autos, retail sales were up a robust 1.0% in July. That’s quite an encouraging sign. After all, consumer spending — the primary catalyst of economic growth — remains healthy even as other sectors of the economy, such as business investment, have weakened with the trade war.
“While the incoming global data have been weak, the latest round of U.S. data would not seem to warrant another rate cut so soon; not with core inflation rebounding and the U.S. consumer seemingly hell-bent on single-handedly saving the world economy,” said analysts at Capital Economics, as quoted by Yahoo Finance.
Even San Francisco Fed President Mary Daly just said a recession is not on the horizon. “When I look at the data coming in, I see solid domestic momentum that points to a continued economic expansion,” she said, as quoted by MarketWatch.
While the CME Group Fed Watch Tool is showing 98.1% probability for a 175-200 basis point cut, we’re not so sure we’re going to see anything more from the Fed at the moment.