The Fed kept rates at .25%. They will keep them there for some time:
The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.
According to the latest dot plot, the Fed anticipates that rates will remain at this level through 2021 and likely 2022.
The Bank of England increased bond buying by 150 billion pounds. Here is the bank’s assessment of the UK economy (emphasis added):
There are signs that consumer spending has softened across a range of high-frequency indicators, while investment intentions have remained weak. … The fall in activity over 2020 has reflected a decline in both demand and supply. Overall, there is judged to be a material amount of spare capacity in the economy. … Household spending and GDP are expected to pick up in 2021 Q1, as restrictions loosen. The level of activity in the first quarter is expected to remain materially lower than in 2019 Q4. ... Over the remainder of the forecast period, GDP is projected to recover further as the direct impact of Covid on the economy is assumed to wane.
The UK’s recently announced restrictions will have a material impact on growth in 4Q20 which will bleed into 1Q20. And that’s before adding Brexit into the mix. The next 4-6 quarters will be very soft for the UK.
Initial unemployment claims are still terrible:
In the week ending October 31, the advance figure for seasonally adjusted initial claims was 751,000, a decrease of 7,000 from the previous week’s revised level. The previous week’s level was revised up by 7,000 from 751,000 to 758,000. The 4-week moving average was 787,000, a decrease of 4,000 from the previous week’s revised average. The previous week’s average was revised up by 3,250 from 787,750 to 791,000
The 4-week moving average has been remarkably stable (in a bad way):
And the rally continues. Today, small-caps moved higher, with the small, micro, and mid-caps rising nearly 3%. But large-caps also had strong moves higher. Treasuries were also up modestly.Basic materials and industrials are once again near the top of the table, as traders bet on continued manufacturing strength. Tech was number two. Defensive sectors were at the bottom.
As I was watching my screens today, I noticed the end-of-the-day sell-off, which is almost never bullish. It also had higher volume, another bearish indicator. Add in the double top, and you have a clear topping pattern.SPY 2-weeks
The QQQ also formed a double-top today which would finish off its upward move from the double bottom in late October and early November.
This week’s rally has been very odd. I certainly wasn’t expecting it. My guess is that headlines of McConnell wanting to get a stimulus package out by year-end is a big reason.
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