Pointing to that channel of rising highs and lows for the S&P 500 in the chart is getting to be routine in these notes but, in hindsight, the Index could now be reflecting an emerging reflation/stability trade in view of recent developments. Last Friday’s close left the Index some 2 percent from its April post-financial crisis high and, indeed, the major indices (e.g., FTSE 100, the FTSE EuroFirst 300 Eurozone) finished the week on an upbeat note.
As for the developments, perhaps the story is less of what didn’t happen and more of what is expected to happen.
While the Federal Open Market Committee (FOMC) chose not to budge on policy last week, the more likely prospect is that it will do something at its September meeting when it next presents its economic projections. The Fed will have welcomed the better than expected rise in jobs reported for July’s Nonfarm payrolls but it won’t have liked the rise in the unemployment rate, even though the rise was marginal. More >