Easing cycles into soft/no landings are bullish for stocks, plus 🧁 weekend sprinkles 🧁
Easing cycles into soft/no landings are bullish for stocks, plus 🧁 weekend sprinkles 🧁
The Sandbox Daily (9.20.2024)
Welcome, Sandbox friends.
Apple's new AI-ready iPhone 16 hit stores Friday all around the world, all three major U.S. averages closed higher this week by at least 1% despite uncertainty around the Fed’s interest rate decision, and mortgage rates dropped to their lowest levels since early February 2023.
Today’s “triple witching” – the simultaneous expiration of stock options, index options, and index futures contracts – often results in greater trading volume and volatility, but today seemed rather ho-hum with the exception of the strength in utilities.
Today’s Daily discusses:
easing cycles into soft landings are bullish for stocks
🧁 weekend sprinkles 🧁
Let’s dig in.
Markets in review
EQUITIES: Dow +0.09% | S&P 500 -0.19% | Nasdaq 100 -0.24% | Russell 2000 -1.10%
FIXED INCOME: Barclays Agg Bond -0.09% | High Yield +0.12% | 2yr UST 3.591% | 10yr UST 3.739%
COMMODITIES: Brent Crude -0.29% to $74.68/barrel. Gold +1.20% to $2,646.1/oz.
BITCOIN: -0.70% to $62,767
US DOLLAR INDEX: +0.16% to 100.773
CBOE EQUITY PUT/CALL RATIO: 0.77
VIX: -1.10% to 16.15
Quote of the day
“Never put passion before principle. Even if win, you lose.”
- Mr. Miyagi, The Karate Kid
Easing cycles into soft landings are bullish for stocks
History tells us that why the Fed is cutting matters. Asset performance around the start of the easing cycle has differed depending on what motivated Fed cuts.
Whether this cutting cycle will ultimately be accompanied by a "growth scare" or a "recessionary" episode is the major question for investors today.
Asset behavior leading into the start of the cutting cycle – say 3 to 6 months prior – has not substantially differed in advance under these different environments, so market performance into the first cut does not seem to help in identifying what comes next.
Meaningful differences in asset performance come only after cuts have begun. In recessionary episodes, yields continue to decline more clearly after the first cut. But, it is in equities where different growth backdrops matter most. In recessions, equities have continued to decline after the first cut, while stocks have rallied strongly in soft landing / no landing episodes.
Source: Ned Davis Research
🧁 Weekend sprinkles 🧁
Here are the ideas, sights, and sounds that caught my attention this week – perfect for quiet time over the weekend.
Blogs
Pearl’s Prime Cuts – The Busy Addiction (Philip Pearlman)
Young Money – Tell Good Stories (Jack Raines)
Oaktree Capital – Shall We Repeal the Laws of Economics (Howard Marks)
Podcasts
RenMac Off-Script with Jeff deGraaf and Neil Dutta – Sticking the Landing (Spotify, Apple Podcasts)
Animal Spirits with Ben Carlson and Michael Batnick – The Michael & Ben Origin Story (Spotify, Apple Podcasts)
Odd Lots with Joe Weisenthal, Tracy Alloway, and special guest Sam Ro (Spotify, Apple Podcasts)
Up and Vanished – The Disappearance of Tara Grinstead (Podcast Website, Spotify, Apple Podcasts)
Movies
Blink Twice – Channing Tatum, Naomi Ackie, Christian Slater, Zoe Kravitz (IMDB, YouTube)
The Ministry of Ungentlemanly Warfare – Henry Cavill, Alan Ritchson, Eiza González, Alex Pettyfer (IMDB, YouTube)
Music
Boys Like Girls feat. (3OHI3) – The Outside (Spotify, Apple Music, YouTube)
Shoby – Outside (Spotify, Apple Music, YouTube)
Books
Josh Brown – You Weren’t Supposed To See That (Amazon)
Pop Culture
Kyla Scanlon – The Mr. Beast Memo is a Guide to the Gen Z Workforce (Substack, Instagram)
That’s all for today.
Blake
Welcome to The Sandbox Daily, a daily curation of relevant research at the intersection of markets, economics, and lifestyle. We are committed to delivering high-quality and timely content to help investors make sense of capital markets.
Blake Millard is the Director of Investments at Sandbox Financial Partners, a Registered Investment Advisor. All opinions expressed here are solely his opinion and do not express or reflect the opinion of Sandbox Financial Partners. This Substack channel is for informational purposes only and should not be construed as investment advice. The information and opinions provided within should not be taken as specific advice on the merits of any investment decision by the reader. Investors should conduct their own due diligence regarding the prospects of any security discussed herein based on such investors’ own review of publicly available information. Clients of Sandbox Financial Partners may maintain positions in the markets, indexes, corporations, and/or securities discussed within The Sandbox Daily. Any projections, market outlooks, or estimates stated here are forward looking statements and are inherently unreliable; they are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur.