The Monday Morning Playbook: Week of September 16, 2024

Good morning,

It’s Fed week.

I include the economic calendar in this report each week, not because we’re especially concerned with specific numbers being reported, but because we want to be aware of market-moving events.

However, nobody needs that calendar this week because there is only one event that really matters: The Fed’s interest rate decision and statement on Wednesday.

What makes this decision exceptionally interesting is that while everybody knows the Fed is going to cut, literally nobody seems to know if they will go 25 or 50.

In fact, as of this weekend, Fed fund futures were deadlocked at a 50-50 chance of each.

Now, there’s no value in guessing or me telling you what I think they will do (or worse yet what I think they should do) because as we’ve determined:

Nobody knows.

But when we look at the charts, it is hard to be anything but bullish. Markets rallied strongly last week, highlighted by an intraday reversal on Wednesday and a huge move in semiconductors. Other risk-on groups like discretionary and small-caps outperformed while defensives finally showed signs of taking a much-needed break.

All that put the S&P 500, and many other key indexes, ETFs, and stocks, back within a hair of all-time highs.

Could the Fed screw this up? Sure.

Is the back half of September a headwind from a seasonal perspective? Absolutely.

But whether a breakout happens this week or after the election, the charts still support betting on stocks over bonds and new all-time highs for equities by year-end.

In addition to the bullish action in stocks, gold is already at a new all-time high. Gold miners have been a frustrating and choppy trade but they are finally breaking out from their summer slumber and provide the best chance of outperformance if both gold and stocks continue to work.

This week’s report will review:

• Last week’s bullish reversal

• ETFs setting up for a breakout

• Rates and the dollar ahead of the Fed interest rate decision

• Sector performance following previous “first” cuts

• Seasonality

• and more!