You Gonna Make a Cake, Too?

Treasuries, gold, and most of the Nasdaq are up today, in most cases quite decisively, as a looming rate cut at the September 17th FOMC seems all but a lock. Of course, one major issue is whether Powell and his crew decide to cut 25 or 50 bps--A 25bps cut may very well disappoint markets, although 50bps may scare them into thinking something has broken. 

But for the time being the market is taking the optimistic view, as usual, despite an abhorrent jobs report Friday, or perhaps because of it. 

The other major issue is that we have some prominent inflation data this week, between the PPI and then CPI on Thursday morning. Once again, the market is baking a rosy scenario into the cake and ignoring the possibility of a red-hot print. 

At some point, which has admittedly not yet occurred, the cake gets fully baked and there is nowhere to go but down. We saw a similar setup in the autumn of 2007. 

However, each cycle is different. And the risks to cutting here could backfire in a few ways, be it the stagflationary scenario where rates on the long end shoot higher (like last year when The Fed cut) or a sharp deflation where The Fed is, indeed, too late to cutting into economic deterioration. 

My view remains constant: Stagflation is the most likely risk going forward, as slowing economic growth coupled with sticky high inflation to punish the majority of the country harshly, as profit margins eventually compress for firms and send most growth stocks decisively lower. 

To keep this actionable, we continue to highlight under-the-radar sectors for Members. But precious metals and miners remain front and center (for us, at least, even if most still are not onboard), Keep an eye on platinum and palladium here, PLG PALL respectively, and non-extended miners like AG and MUX on the long side.