Good Morning,
Labor Day weekend is upon us and with it, the unofficial end of summer. I will say it was great to see college football back on Saturday!
Stocks opened lower this morning as rising tensions in the Middle East pushed oil prices higher. Last week, earnings reports from NVDA and CRM reinforced confidence in the ongoing AI infrastructure buildout. However, Chair Warsh's more hawkish speech at Jackson Hole sparked concerns about the future path of interest rates. Investors are now pricing in a September rate hike, an expectation that had previously been pushed out to December.
I believe the key test this week will be the August jobs report, which is scheduled for release on Friday. Following Chair Warsh's hawkish remarks, labor market data will be especially important in determining whether the market's increased expectations for a September rate hike are justified.
While a rate hike is not typically a tailwind for markets, I believe underlying earnings growth has remained strong enough to absorb and potentially offset the Fed's need to tighten. In my view, the overall backdrop remains constructive, with a preference for value oriented equities and shorter duration fixed income. I also continue to believe that any near-term volatility should be viewed as a buying opportunity, all things considered.
As always, please feel free to reach out with any questions or comments.
The regular Market Strategy Radar Screen report will return next week.
Have a great and safe Labor Day weekend!