Week Jul 26, 2024

Fixed Income

PCE report came in line with expectations. Yields dropped as a result of Fed rate cut expectation starting in September. We will get more clarity as the Fed heads into next week’s FOMC meeting. Rate cut expectation for September increased this week. In addition, unemployment has been ticking up, triggering the Sahm rule.

Equity

Despite a strong GDP print, equity market was volatile this week. Market rotation to small caps continued this week. Despite the market volatility in large cap tech, small cap outperformed. Investors were looking for reasons to sell large cap. Investors were beginning to see that the returns from heavy Capex investments in AI may take longer to pay off. Market particpants rotated to small cap on the bet that interest rates will drop soon.

Equity dropped 1.55% this week. VIX rallied.

Next Week

• Fed Meeting

• Earnings

• Economic data such as JOLTS, jobless claims, Jobs Report

Market Outlook