Tomorrow will be the 20th anniversary of 9/11, so it’s tough to talk about the markets on a day like this. With this in mind, we’ll just highlight a few bullet points…and leave the rest of the market analysis to our weekend piece.
---If the Fed was really “data dependent,” they would have started tapering a long time ago. The data has told us for quite some time that we are no longer in an emergency situation in the economy or the markets, so we no longer need emergency levels of stimulus.
---Despite the negative news out of the airline industry yesterday, the XAL airline index rallied over 2.6%. It looked like a “buy the news” short squeeze for the group, but we question how long this will last. Even though the airlines bounced, the DJ Transportation Index still fell by over 1%. This is due to the fact that the railroads fell 1.8% and the truckers gave back 2.4%. So, you can see that this economically sensitive sector actually had a rough day yesterday.
---Since August 17th, long term yields have risen slightly, but this has not had a negative impact on the big-cap tech names. The equal weight index of the FAANG stocks has rallied almost 8% since then. This might be indicating that these big-cap tech names are becoming “safety” assets. We are skeptical that these stocks can continue to hold up if the stock market sees a more meaningful decline, but we have to remain open to the idea that the tech stocks might outperform if the broad stock market acts poorly in the coming weeks.
---The economic data shows that the economy is doing just fine, BUT that data has been weaker-than-expected in total this week. However, the yield on the 10yr note is basically unchanged since last Friday. (It’s lower…but only very slightly lower.) This is another reason to worry that stagflation will become a problem going forward.
We’ll leave it there this morning. We’ll simply add that our thoughts are with those who lost loved ones on that horrible day 20 years ago. God bless you all.
Matthew J. Maley
Chief Market Strategist
Miller Tabak + Co., LLC
Founder, The Maley Report
275 Grove St. Suite 2-400
Newton, MA 02466
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