Flowers grow with the rain

The bulls are girding up their loins as the S&P 500 looks to test 7000; buoyed by positive trade signs, expectations of an interest rate cut from the Federal Reserve later today, and strong corporate earnings, the bears are starting to retreat. Are we yet, as Mr Buffett would say, in greed territory? It feels like we are getting closer—if not in greed, then certainly quite peckish. A couple of examples, latest Consumer Confidence Index survey: 49% say stock prices will be higher in 12 months —that’s the top end of bullish sentiment. Some other technical indicators are starting to look stretched. It will be interesting to see the latest AAII retail investor survey out tomorrow, which may show further risk-taking amongst retail investors.

The next few days could test the resolve of the bulls as 5 of the Mag 7 report over Wednesday and Thursday. UPS posted strong results on Tuesday, continuing the positive run of corporate earnings. Nvidia added to its portfolio, taking a stake in Nokia. We then have the Fed meeting later today. Powell’s comments on the outlook for rates, rather than the decision itself, may be of more significance, along with his take on the economic outlook. Then, of course, we have Trump and Xi meeting, both know the two economies are linked, whether they like it or not. Much still could go awry, and tensions between the two proud leaders could flare anew, with global collateral damage.

Last week, Jamie Dimon talked of cockroaches and Bandrew Bailey, canaries, when referring to the risks in the credit market after First Group filed for Chapter 11. Goldman Sachs Chief Executive Officer David Solomon is less worried, commenting yesterday that he does not see any systemic risks in the credit market at present.

The Fed will cut despite claiming to be “data dependent,” with no data available due to the ongoing shutdown. As the government shutdown enters its fourth week, it feels strange in a country like America that, as a result of the Federal Shutdown, payrolls are affected across multiple categories of federal employment. One consequence is that the billionaire recluse of the Mellon banking family has offered to pay the soldiers’ wages, which, to my mind, is a terrible state of affairs. This is the most notable example; another is air traffic controllers. It’s fair to say that once the shutdown ends, they will receive back pay, but many workers performing essential duties are not paid despite working for the US government during this period.

A story in one paper says that Rachael Reeves is apparently looking to introduce a National Wealth Fund, similar to a Sovereign Wealth Fund, to help stimulate growth. Undoubtedly a good idea; just so long as it’s not funded by taxes or borrowing, I would suggest.