Stage setting

This week will be dominated by the FOMC meeting that will conclude on Wednesday. Expectations point towards a “no-move”, but more importantly, it’s expected for J Powell to set the stage for a cut in September. As you can see in the chart below, Core PCE, the Fed’s favorite inflation indicator, is at 2.63%, which is pretty close to the 2% target. Unemployment is growing slowly, and doesn’t seem to be a concern at this point. The data dependent Fed may argue in favor of a cut in September since ot may not have another opportunity until immediately after the election, or December, since October will be considered to close to Election Day and will be heavily criticized to be biased. Regional Banks are up 19.3% over the last 12 trading days, in anticipation of a cut.

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