This Wednesday, the Federal Reserve meets concerning monetary policy and interest rates. We believe the Federal Reserve should highlight underlying improvements within the inflation dynamic. In addition, we believe the Fed will not likely declare victory but will probably highlight the risks to growth and inflation are getting into balance. The National Federation of Independent Business small business optimism index declined in August, marking the 20th consecutive month below the 49-year average of 98. The survey noted that 23% of small business owners reported inflation as the single most important business problem, up two points from last month. This is a negative signal for the stock market.
Trading recommendation: sell 4475 and take profit 4325.
A report from the University of Michigan showed consumers' 12-month inflation expectations fell to 3.1% in September, the lowest since March 2021, from 3.5% in August. They are just above the 2.3%-3.0% range seen in the two years prior to the pandemic. Consumers' long-run inflation expectations dropped to 2.7%, falling below the 2.9%-3.1% range for the second time in the last 26 months. The inflation news bolstered expectations the Fed would leave interest rates unchanged at the end of its Sept. 19-20 policy meeting. It is a positive signal for the precious metals market.
Trading recommendation: buy 1915 and take profit 1930.
Oil prices hit a 10-month high and posted a third weekly gain as supply tightness spearheaded by Saudi Arabian production cuts combined with optimism around Chinese demand to lift crude. Supply concerns continue to be a driving force for prices since Saudi Arabia and Russia this month announced an extension of their combined supply cuts of 1.3 million barrels per day to the end of this year. Better-than-expected industrial output and retail sales data in China have also boosted oil prices this week, with the country's economic conditions considered crucial to oil demand for the rest of this year.
Trading recommendation: buy 88.75 and take profit 91.15.