Halyard’s Post-Labor Day Road Map – 2004

With the unusually hot (for the Northeast) weather, a most satisfying Olympics games, and the last of the days in the Hamptons behind us, now seems a good time to put together a road map of where we think the markets will be at the end of this year.  Compared to years past, the last four months of 2024 seem particularly fraught with wild cards.

The first challenge will come on the Friday after Labor Day with the August employment report released on the morning of the 5^th.  Through most of 2023 and the early part of 2024, the jobs number was prone to surprise to the high end of expectations.  Since April, that has not been the case, with the number of new jobs coming in at the low end of expectations on several occasions.  The August report will have an outsized impact on markets, especially after the mini one-day crash in August.  That’s because it will have a significant impact on the Fed’s decision on interest rates which comes on the 18^th of the month.  There are those that thought the Fed should have cut interest rates in response to the sharp selloff, but the consensus has it that the Fed will reverse their tightening in a similar fashion to the tightening exercise and move in 25-basis point increments.  With the real rate of return on overnight money at approximately 2.00% and inflation improvement stalled, we think the Fed will cut rates by 25 basis-points at each of the subsequent FOMC meetings scheduled for November 7^th and December 18^th.

The Presidential debate is tentatively scheduled for September 10^th but whether the debate will even happen remains to be seen.  The Vice-President has shied away from the media and may be fearful of a bullying Trump.  For his part, Trump raised an eyebrow on Wall Street with the opinion that the President should have the power to control interest rates.  The last President to have that influence was Richard Nixon’s control of then Fed Chairman Arthur Burns and let’s not forget how that turned out.  We don’t expect that the debate will change any minds, so the outcome is unlikely to be a market moving event.

Halloween falls on a Thursday this year and while young children will delight in dressing up as Spiderman or Taylor Swift, investors will likely breathe a sigh of relief because this will be the last day of the dreaded month of October and the infinite media coverage of the market vulnerabilities in this month.

That fear is likely to carry over into the new month though as election day falls on the following Tuesday.  To not offend either side of the political divide, and it’s a yawning one this year, we’ll leave this as an unknown in that it’s not clear what impact the new President will have on the markets.

Thanksgiving falls on November 28^th this year, the latest it possibly could, giving retailers an extra week of in-store sales, even though black Friday has been eclipsed by cyber Monday for consumers.  Employment is likely going to be a driver of sales during the holiday and perhaps, to a lesser extent, falling interest rates.

December 18^th is the date of the final FOMC meeting of the year.  As we stated earlier, we expect that the committee will cut the overnight rate by 25 basis-points even though we abhor any rate action so close to year end as financial institutions scramble to close their books for the year.  We close with a recommendation for Chairman Powell; don’t be so forthcoming at the press conference.  The burn from last year’s prediction and the subsequent reversal is still fresh in the minds of bond traders.