Looking for bullish reasons to keep the stock market rally’s momentum, the media said is convinced that the Fed will cut rates.
Powell countered the claim that the political calendar (such as the U.S. presidential election) would influence the Fed’s rate-cutting plans. Powell said on Wednesday that rates will change when and as needed. Markets believe that the Fed would cut rates in September, before the fall presidential election.
The debt market is certain that rates will fall soon. 1-year treasury yields fell to 5.0%. The 2-year and 30-year treasury yields also fell. However, the three and six-month t-bill yield increased slightly. A 3-month pays 5.38%.
Crude Prices Strengthen
Crude prices are showing signs of strength. WTI crude closed at $82.51 after the government reported that the Fourth of July holiday increased jet fuel demand. Investors may consider ETFs including USL, DRIP, USO, and UCO if they believe that oil prices will continue to rise.
Inflation Data
Markets will react to this morning’s inflation report. Despite inflation above the Fed’s 2.0% target, a 25 bps interest rate cut would loosen credit conditions further. This stimulates the economy and increases the demand for goods. Readers may consider SPY or IVV for exposure to the S&P 500. Expectations of falling inflation would ensure that the index continues to trade at all-time highs.
