Welcome back. Markets bounced back on Wednesday, the Dow closing up around 300 points. But the ten year yield is still sitting near a two-year high with a lot going on — earnings, rates, geopolitics, AI, and tech. Joining me is Eric Criscuolo, Market Strategist at the New York Stock Exchange. Eric, thanks for your time.
Always a pleasure.
Warsh was hawkish at Jackson Hole. Is he just saying that to sound hawkish and control rates temporarily, or is that really where he is leaning?
That is the question. He was definitely hawkish. But we will find out in a little bit when the FOMC meets later this month. There are still a lot of puts and takes as far as what the data is showing. Inflation is holding steady — not really going up, not really coming down fast either. We definitely had some dissenters who wanted to hike at the last meeting. Employment prints are moderating but not collapsing. We are going to get a big data print Friday for the jobs report, so that is going to be really important to see where the Fed wants to position things. And then you also have to add in what the Treasury is doing — does the Fed and Treasury work more closely together to monitor and control rates on the long end, especially with the step-up in the buyback programme? There are a lot of flows in that yield area which are going to impact what the Fed does. It is not a slam dunk that they will raise. But it is going to be tough for them to stay on their hands.
Economic data, job numbers — they have all been coming in. The Fed is still leaning toward a hike, not a cut. How do you square that?
Inflation is holding steady. There is a wing that is very hawkish at the Fed. Employment is cooling but not collapsing. The Friday jobs report is going to be really, really important. The Treasury has also been stepping up its buyback programme to try and control the long end. There is going to be a lot of questions if the Fed stays on hold. It is tough for them not to go with what the market is doing in September.
What is driving gold and Bitcoin right now?
Gold has responded to the increase in oil which has driven yields higher. Typically as yields move higher, gold sells off a little because it does not yield anything. Gold also had an incredible run about a year ago and is now kind of trading in a range. It is supposed to respond to geopolitical crises — but it has not really done that recently as Iran hostilities have ramped up. It has responded more to interest rates. Bitcoin is also trading in a range — rallied sharply a little while ago and pulled back. It responds to liquidity. When there is risk on and money is moving into the system, Bitcoin moves higher. When it is uncertain and yields are rising and liquidity is pulling back, Bitcoin struggles to find a higher level.
What is the one thing that could move markets in the next few days?
Iran. I hate to always come back to that, but it is driving oil, it is driving rates, it is driving yen interventions in currency markets. If there is any type of step down with the Iran situation, oil pulls back and rates come down — and that will help equities.
Eric, thanks so much. Always great to chat with you.
Always a pleasure.
