Giles Coghlan LLB, Lth, MA
HYCM
There are growing rumours that the Federal Reserve is about to do a pivot. The disturbance in the UK Gilt market sent a warning signal to financial markets that making a wrong step in tackling the cost of living crisis and surging inflation risks serious disruption with potentially serious ramifications. So, the Fed is rumoured to be considering slowing down its path of hikes.
Furthermore, on Monday the US ISM Manufacturing PMI print missed across the board which meant the market would be pricing in more of a chance of a Fed pause based on that missed data.
So, if the US ISM Services PMI prints miss on Wednesday and the headline comes in below 54 and prices below 65 then we could see a decent leg up in the S&P500 again.
The strong seasonal pattern for the S&P500 could also support S&P500 prices higher, so if the Fed do ‘pivot’ is now the time to enter S&P500 longs?
Major trade risks: The major trade risk here is that the Fed does not pivot and keeps to a hawkish rate path. Also, earnings could still move sharply lower even if the Fed does pivot.
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