The inflation report was great news. However, it doesn’t change the fact that the economy will keep weakening in the face of higher rates and layoffs. With anemic wages and student loan payments, consumers are in poor shape. The indexes are also heavily weighed down by companies facing huge problems and high valuations, like Tesla.

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It’s election day, and many market watchers are hopeful that GOP win could be good for the market. A temporary bounce is possible, but the long-term impact is probably extremely minimal and already priced in at this point.

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The FOMC meeting offered little hope for bulls, with Powell saying we are nowhere near a pause in rate hikes. With poor Big Tech earnings weighing down the S&P, the index doesn’t look good in this high rate environment. There are a few quality stocks doing well today, though, such as $CROX and $INMD .

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When retail investors buy puts, they often buy them from institutions. To hedge their short put positions, these institutions then short the underlying asset. When put traders close out their trades during “bad news” days, dealers then automatically unwind their hedges. This means short covering, which contributes to the market rising during “bad news” days. I explain this in more detail in the podcast.

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Stocks have fallen, but risk-free treasury bonds have fallen just as much. That means that on a risk-adjusted basis, stocks aren’t any cheaper than they were at the start of the year. In addition, growth expectations are falling and debt expenses are rising. The Fed isn’t going to pivot without a huge crisis. Therefore, the risk/reward of stock indexes don’t appear to be very attractive to me at today’s prices.

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The Jackson Hole speech crushed the market, and a Fed member even said they were happy to see it fall. Is a bear market the goal of the Fed, or are actually focused on fighting inflation expectations? And have inflation expectations peaked?

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This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit atticusanalysis.substack.com

Bonds are rallying, but the debate about the fabled “Fed Pivot” is missing the point entirely. Bonds began their rally before there were expectations for a pivot, and they have continued to go up even today, after the Fed said the pivot isn’t happening soon. Instead, a decline in future inflation expectations has driven bonds higher.

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Inflation has peaked, so bonds are set to keep rallying. For those seeking high risk, calls on bond ETFs are attractive. Also, rally aside, the earnings season for stocks has been underwhelming.

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We have a big week with more earnings and another Fed meeting. But without a clear trend and with lots of paradoxical price action & volatility, clear setups aren’t emerging in most stocks. Bonds do look attractive, though. I also talk about the virtues of patience and the dangers of over trading.

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