The economic calendar for the week ahead:
Monday - No reports
Tuesday - No reports
Wednesday - Existing Home Sales, EIA Crude Inventories, FOMC Minutes
Thursday - Initial Claims, Continuing Claims, Leading Indicators, EIA Natural Gas Inventories
Friday - New Home Sales, Fed Chairman Powell speaks at Jackson Hole Economic Symposium
What to watch in markets this week:
FOMC Minutes - We get into the thinking of the Fed when FOMC policy meeting minutes are released on Wednesday. In July, the FOMC delivered its first rate cut since 2008 today and ended its balance sheet reduction two months ahead of schedule. Current Fed Funds target is 2% - 2.25%. The probability of a 25 basis point cut at the September meeting is 78%, and the chance of 50 basis point cut is 21%.
Source: CME Group publishes the FedWatch Tool
Jackson Hole Economic Symposium:
Federal Reserve Chairman Jerome Powell will speak at the Fed’s annual Jackson Hole Economic Policy Symposium this Friday.
Traders would like Powell to clarify the Fed’s future monetary policy path and comment on the Fed plans to cut future rates or not. Not so fast.
We don’t expect a policy change announcement at Powell’s speech. We expect a “dovish” delivery. Jackson Hole is known as an academic conference, and any notable comments would be a surprise.
Lean Hog Futures -
Lean Hog Futures (LHV9) traded limit-down to $62. Friday's settlement was just above support at 61.80. The lower move puts support in play this week. If weakness prevails on Mondays open, Hogs could test support 58.5, and then the next support level is around 53.
Global Bonds Overcrowded Trade? The desperate hunt for yield is getting stranger every day. Would you invest in an Austrian 100yr bond yielding 1.1%? How about Great Britain's 50yr at 0.94%? There has been a great analysis of this phenomenon by Jim Grant from Grant's Interest Rate Observer.
Grain Market - Looking ahead this week, crop tours will start hitting the roads, and this will likely have some influence on price action. Grain traders will also turn attention away from the trade war and USDA estimates and back to weather and crop development.
The Corn futures market took a drubbing last week down -9.5%. Soybean and Wheat futures also declined -0.74% and -5.76%. Grain traders that were long Corn futures "Threw In The Towel" and hedge funds and CTAs are now positioned short. There were also some likely forced sellers by margin/risk departments. Read More
Oil Market - WTI oil futures were up 0.70% last week. Rumors have been making rounds that OPEC is disappointed with oil demand and they may "Shock and Awe" oil traders with production cuts. (Read More)
Trump Backs Down on Trade Tariffs, Again - We wrote in the newsletter last Wednesday that Trump's pattern is to go from severe to weak on China trade. And then, "rinse and repeat." When the stock market declines by more than 2% expect the dual whammy of Trump jawboning and Plunge Protection Team (aka N.Y. Fed) intervention. Well, Trump "blinked" again. I wonder what the Chinese diplomats think of his ongoing trade war negotiation pattern?
Geo-Political - Argentina is on the brink of crisis after the stock market (S&P Merval Index) collapses 48% on Monday. Investors worry that Argentina will default on debt again. We are monitoring markets for any emerging market spillover.