After a torrid first half of the year, tech and growth stocks have been correcting over the past few weeks. So far, a large majority of companies have reported earnings that have beaten estimates but the reaction from investors has been relatively negative. Companies are beating expectations but stocks are going lower because they were mostly fully priced. Energy stocks have done the best lately. Inflation is down, but oil prices are at a six month high. Overall, it’s a tricky market to navigate at the moment.
July CPI numbers were slightly below expectations, but the PPI was slightly higher. The Fed won’t stop raising rates until it believes inflation has been tamed. However, Fed Funds futures markets are pricing in a 90% probability of no increase when the Fed next meets in September.
More and more market prognosticators are off the recession forecast. The Fed itself is no longer predicting a recession. Perhaps the extended inversion of the yield curve in this case will turn out not to be a portent of recession. Goldman Sachs sees rate cuts beginning the second quarter of next year. We are close, if not at the top of interest rate hikes.