Weird Market Expectation: July Market Watch


Something peculiar is unfolding in the stock market expectation at this moment in human history. I sense there might have a tremendous opportunity opening for us if this weird expectation continues to develop. 

Every sensible investor knows that the US economy is doing substantially well or better than all other global economies. The US economic data so far has not verified any weaknesses. But market analysts and commentators are all expecting a rate cut going to happen at the end of July after the Fed committee meets. Instead of projecting a quarter-point of an interest rate cut, some crazy fellows even projected a 50-point rate cut or two times rate cut by the second half of this year. 

Weird Market Projection

These reporters and news analysts have been reading too much into the lips of Powell, the Fed Chairman whenever he gives speeches regarding the market future. Even though he did not promise anything about having a rate cut decision in the coming meeting, market players interpreted as if he has said so.

He only promised he will support the market whenever necessary. It is only a general statement he can say anytime anywhere, regardless of market condition. But the equity market reacted cheerfully then. All equity indexes went up creating new historical heights, US dollar index went down-dropped dead, gold prices pushed up breaking into new heights, etc ….

Image result for image of Trump and Powell
Powell insisted that he will not yield to political pressure if he makes decision for the US economy.

To my understanding, if Powell remains true to what he said before, he will not submit to political pressure coming from President Trump, he and his team will decide according to available economic data, not according to political pressure or suggestion. There will not be any rate cut as of this July after Fed’s meeting.

Watch for Wonderful Opportunity

As I have mentioned before somewhere in FB page, there was only one person, St. Louis Fed President James Bullard out of 9 in the committee voted for the move to cut rate. It will need to take drastic economic changes to increase a such number of votes from 1 to 5 in the next meeting. Right now, there was no such negative economic development yet since after the June meeting.

What makes market players believe there will be a rate cut July meeting is very peculiar now. Since market indexes have been pushed to such historical heights based on speculations, I believe there will be a great disappointment when the Fed sticks to their principle-based on economic data that they will decide not to have a rate cut in July meeting. By then, equity markets will fall dead and spinning all around the world.

Image result for image of James Bullard
The only person, James Bullard voted for a cut of interest rate in June meeting.

If that is happening, all sensible investors like us should take full opportunity to grab all stocks with good fundamentals.  Because speculators are leaving the market presents us with a wonderful opportunity to enter when it is damned cheap. I am sure there will be a beautiful rebound after sensible investors take over.

Critical Data to Watch

However, there is still one more week of corporate reports, from major banking sectors and the FANG before the Fed’s meeting for the decision matter on 30-31 July. Unless some weaknesses were proven among these corporate reports, the Committee will decide no rate cut for July.  Unless they absurdly yielded to political pressure or market expectation, they might decide to have a rate cut by a quarter-point. If the latter case happens, the equity market will continue to fly high celebrating a reversal of Fed policy for another monetary easing trend.  As a reason, it will be extremely exciting and interesting to watch market development next week.  

Folks! Let’s get ready your bullets whenever the market falls if ever it would! The current US market scenario is still conducive for us to take advantage because the US economy is still strong and healthy. If not, the Fed will be there to cut-rate to support the market whenever necessary. Whenever the market falls hard, don’t run away, but add more instead.

However, what I fear the most is not the market fall, but it won’t happen because of various factors happened in between.

Happy investing!

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Disclaimer

The view and opinion expressed are personal views of the author and are subject to change based on market and other conditions.  This write up does not constitute sole advice for investment decision. Investors are advised to do further reading and research to conclude individual decision.

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