Little Reaction In Stocks From Warsh, Bigger Elsewhere
As expected, Kevin Warsh did not set off any fireworks from Jackson Hole on Friday. He was a touch hawkish, possibly setting the markets up for a rate hike. As you know, I am on the other side of that trade, believing all year that the Fed’s next move would be a rate cut later in 2026. And while Warsh may make me look foolish next month, I still see a Fed pivot coming sometime in Q4 or early Q1 2027.
The stock market reversed early gains on Friday. The major indices are set up for lower prices this week.
FYI, September begins tomorrow and I am sure the pundits will be out in force warning that September is the weakest month of the year which is true. However, September averages +0.40% when it begins in an uptrend like now. It’s down almost 3% when it begins weak. Those stats do not mitigate what I still think is a plausible scenario for a 5-10% decline already in progress.
And by the way, we did have some larger magnitude moves on Friday in other asset classes. Gold took it hard on the chin, just after bullish sentiment jumped.
And you would guess from gold, the dollar jumped as I forecast more than a week ago. Our Emerging Markets strategy reduced exposure as such.
On Friday we bought more EEV. We sold XLI, some QLD, some EWY and some EWT.
