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The Macro Situation

False Bay (noun)

• a bay in South Africa, so named because it was confused by sailors with Table Bay to the north;

• the period in economic cycles where one finds out that the present state of affairs is not where one thought it was.

― New Entry in the Updated Devil’s Dictionary

While the IMF has forecast a 2.8% growth for the US economy in 2024 and 2.2% in 2025, the leading economic indicators were less positive.

The LEI dropped by 0.5% for September compared to a revised 0.3% for August.

• Experts had forecast 0.3%.

• While the LEI looks at 10 indicators, those significantly affecting September included lower factory orders, yield curve inversion, decline of building permits, and low consumer confidence.

On a positive note, jobless claims continue to defy predictions. Last week's numbers came in at 227,000 compared to the 245,000 expected by experts. The anticipated knock-on effects of the hurricane delaying jobless claims seems not to have materialized.

Interest rates are set for another cut. At the time of writing, the Fed Watch tool, which tracks the prices of various futures contracts related to interest rates (particularly the federal funds rate), estimates the chances of a rate cut in November are 95.1% for 25bps and 4.9% for no cut.

The Chicago Fed made an adjustment to the ANFCI. The new reading places conditions at a -.58, which is just below the (newly adjusted) -.57 of last week. This level indicates that financial conditions are still loose.

Core Assets Update

Gold (2760.80) was mainly buoyed by uncertainty in the Middle East and the upcoming US elections. Meanwhile, the US dollar (104.32) remains relatively strong.

• Watch: GLD, GDX, NEM

Crude Oil (71.69) prices were choppy this week. While tensions in the Middle East created upward price pressure, a strong US dollar and increasing oil inventories create resistance.

• Watch: USO, VAL, XOM, RIG

The 10-year Treasury yield (4.242%) hit a 3-month high this week, mostly in reaction to comments made by the Fed about the battle with inflation not being over and what this may suggest for future rate cuts.

• Watch: TLT, EDV, IEF

― Todd Mei, PhD and Sebastian Purcell, PhD

AI Sentiment Report

The following sentiment scores use AI to track sectors as leading indicators. (Lesson 4 of The Art of The Bubble covers the selection of lead indicators for bubble trades). The scores are most indicative for the next day of trading (a Monday), but they appear to set the general tone for the next week.

― The Research Team:

Dom Viera, Samantha Russell, Nicole Zinuhova, Michelle Milan

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Benchmarks and Data Sources

All data not otherwise specified (or obvious from context) is taken from TradingView.com.

The cryptocurrency benchmark used is an equally weighted mix of BTC and ETH. While the benchmark for stocks used is the Nasdaq 100.

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