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well the S&P 500 is still on track for its fourth straight weekly loss in a row that would be the longest losing streak in almost a year and this comes as investors do stay cautious following this week's massive surge in volatility here to discuss we want to bring in Ed yard Denny he's the president of yard Denny research Ed it's great to see you again so we last spoke on Monday morning when it looked like things were falling apart yet you told us at that time you said Don't Panic the unwind should quote be over by the end of the week so here we are at the end of the week it looks like you were right but what should investors now be anticipating that we'll say well yeah my my point at the beginning of the week was that it's too late to panic that much of what we saw was a short covering situation Rees the Yen the the so-called carry trade where um Traders had borrowed a lot of money at zero interest rates in Japan and then converted that uh either into into other currencies uh and bought something like maybe the Magnificent s and so all that CR trade kind of cratered and um the bank of Japan came in pretty rapidly and said you know what we're going toh not be raising rates here as aggressively as we had signaled and so that calmed everything down a lot of this was centered in J Japan uh looking ahead here I think we're going to see the market continue to churn below the July 16th high so I I think that the churn will probably continue through September October until the November elections um so I expect the market just kind of go sideways a lot of volatility below that July 16th high and then I think uh we could very well have a a yearend rally a Santa Claus rally um as uh people become more confident that um the economy is resilient and they might do well don't matter who's in the White House Ed a turn lower even if we do see a a 25 or 50 basis point rate cut which would initiate the beginning of the cutting cycle M well look uh I think when uh we were in the midst of that Panic uh on Friday of last week and Monday uh of this week there was uh some some people calling for an emergency rate cut uh some some as much as 75 basis points others saying that well you know instead of 25 basis points in September the FED should do 50 basis points all that by the way would have exacerbated the uh carry trade unwind because it would have actually strengthened the Yen and weakened the dollar which is a major cause of the unwind so I'm I'm glad that a lot of that uh hysteria is uh probably behind us and why is that well the data that the latest batch of data we've had has been pretty good the purchasing managers for non-manufacturing was pretty good initial claims was was good the economy is doing fine so I I don't I I don't think they believe it or not I don't think the economy needs a rate cut at all uh but uh you know I I I bow to the will of the fed and they they I think we'll deliver 25 not 50 in September and I guess my question is when you take a look at the Market's reaction especially to jobless claims yesterday you had this big rally the S&P having the best day that we've seen since 2022 and this all comes while the market is still pricing in larger than usual Ray Cuts here for September and for the remainder of the year it doesn't seem like both of those positions can be correct can they am I missing something well I I I think uh you're right it's it's either or either the economy is weak and the fed's going to have to deliver more rate Cuts uh and then there is this uh notion that U you know the sometimes you get the market going down when the FED first starts cutting rates but a lot of that has to do with the history of the credit cycle in the past uh the FED started lowering interest rates in response to a credit crisis this time around so far uh we haven't really had a credit crisis we had one last year but the FED dealt with it really pretty rapidly so uh I'm thinking that uh you know in terms of we we have two choices here either the econom is better than expected and we get only 25 basis points or the econom is worse than expected and we get 50 basis points I I pick door door number one I think the economy is fine Ed when we were speaking with a few money managers and and strategists over the course of this week there was the anticipation and then the action that they were noticing of some investors to still say okay we're we're going to open some new positions because we did see attractive or relative to a few weeks back attractive levels for some very highly valued stocks where do you think we'll continue to see that if there is more slippage well I I think that we did start to see the market broaden before the carry trade unwind and I think it'll resume that broadening uh that probably means that the Magnificent 7 um yeah when when when you get a uh a dropping them it's probably something worth considering uh buying them but I think they they may just take a a pause here and the market will resume its broadening into U the the S&P 400 and 93 uh and we could also see some broadening into the smid gaps the smaller midcap stocks and how volatile do you think the market action is likely going to be just judging off of what we saw yesterday when we look ahead to the CPI print that's coming in then looking even further ahead to that next jobs print all coming before the next fed meeting is this something not maybe not to the degree as to what we saw yesterday given a lot of that was from the bounce back from Monday but is that something that's going to become this new Norm it may very well I mean uh it was only a week or two ago where people were observing that the vix was extremely low that there wasn't much volatility that Market just was going up day after day it was a long time since we had a 1% or 2% sell off and well here here it is so these things do kind of cycle and uh we could like like I said I think between now and the elections I I see churning so churning is is volatility Ed great to speak with you again thanks for uh bookending our our coverage here over the course of this week really appreciate it Ed yardi who's the ardi research president
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