Do Rates Hold the Key: Q4 Rally Prospects, Stocks, Bonds and the Fed

Jeffrey Buchbinder (00:00):

Hello everyone. Welcome to the latest edition of LPL Market Signals. Jeff Buchbinder here, your host this week after a week off. Thanks to Marc and Adam for filling in for me. Pleased to be joined by Quincy Krosby on location, somewhere on the west coast. Quincy, where are you this week?

Quincy Krosby (00:20):

I am up in the area just outside of Seattle, Washington.

Jeffrey Buchbinder (00:27):

Very nice. I bet they didn't get as much rain as we got in Boston over the last month.

Quincy Krosby (00:34):

Yeah, actually, that's probably true. Yeah,

Jeffrey Buchbinder (00:37):

We have been hammered with rain. I mean, what happened in city? You saw that Boston got less than that, but it has been really wet. So glad we're getting a nice dry day today. So we are recording this Monday, October 2, 2023. Here is our agenda for today. It's certainly, we're going to hit the government shutdown news over the weekend. That's probably the biggest news of the day, other than the rise in yields. That is not new news. But we are up another 10 basis points on the 10-year yield today, up 4.67 at last check. So we'll recap the market activity from last week maybe with a comment on September. Then we'll talk about prospects for a Q4 rally. Of course, it's October, so that starts off the historically strong fourth quarter, seasonally anyway. It doesn't happen every year, but it happens most of the time.

Jeffrey Buchbinder (01:34):

So we'll assess prospects for that. Next, we will you know, I didn't set out to make the case that the Fed is done. I just, I just think it's important for people to look at some of the data points out there before, you know, you make your own decision, frankly. We're certainly leaning in that direction. There are points on both sides, no doubt. But we are going to make the case for the most part, that the Fed has done its last hike of the cycle. And then when we preview the week, of course we'll talk about the jobs report. And we also got the ISM manufacturing index today, which is quite interesting. So let's start with the market recap in and September, of course, was down, you know, almost 5%. So a tough month.

Jeffrey Buchbinder (02:27):

I guess you could say the week <laugh> down seven tenths of a percent wasn't certainly as bad, but you know, still a down week. And really it was around two issues, I would say. You know, number one, we had the fears of the government shutdown, which the market thought was pretty much unavoidable. But of course, Saturday, McCarthy did an about face, and we actually got a temporary reprieve, you know, pushing that 45 days out. So it's not a solution to the risk of a shutdown. It is just pushing it out. It's kicking the can down the road, so to speak. And we might be in the same position on November 17. So that was one issue. And then of course, rising interest rates. And you see you'll see on the next slide here, that bonds were weak as rates rose.

Jeffrey Buchbinder (03:21):

And that caused jitters for equity investors. In terms of the sectors, I mean, wow, utilities just got crushed. I mean, obviously rate sensitive, that tells you that the market might be more worried about just an inflationary move higher in rates or a Treasury supply demand driven increase in rates rather than a recession, right? This is more about growth. And so defensive sectors are not really getting a bid, right? We had I mean, healthcare did, okay, last, I mean, last week down 1%, not terrible, but real estate down 1.4%. I mentioned utilities down almost 7% and staples down two. So, the sector dynamics here are not really pointing to you know, recession or even a pronounced slowdown, at least not based on what we saw last week. So last thing I'll say, and then I'll hand it over to you, Quincy, the international markets were down, the dollar was up over a half a percent. So any observations from you, Quincy, on the equity side for last week or for the month?

Quincy Krosby (04:35):

Well, yeah, I mean, I think from the macro sense the market's trying to figure out whether or not the higher rates due to more growth that the market sees, more economic growth. I mean, after all the Atlanta FedNOW, as of today for the third quarter, it seems 4.9% real for the third quarter. But you know, or does it see the rates rising and no growth. Because the stagflationary side of the equation. One thing about the yields though, I would add is that I think with the crisis averted scenario, I think you saw selling in the treasuries pushing the yields higher because obviously quite a bit of money came in from overseas, from the U.S. you know, in anticipation of a shutdown, which you know, the ramifications of what you, you would not know.

Quincy Krosby (05:41):

It with the initial closer. So, with the crisis adverted, I think that what you saw is hitting that 4.7 and then at least coming down to 4.6. And one thing about the market right now, it's interesting because guess who's leading the market higher, despite the fact that when they're down, all of a sudden what's resurrected is the characterization of big tech as long duration. And then when they're back up, despite the fact that yields are higher, we suddenly dropped the long duration rationale for why they're going down. So they've been doing all right. I mean, that's the interesting part of this scenario. But you have oil prices which had climbed higher. They've eased just a little bit. But nonetheless, transports are down today, which I think is an important scenario given the oil prices and concerns over the economy. So, you know, regarding the Fed, whether or not it's finished or not, I don't think they know whether they're finished. They don't think they do know. I think they are, you know, trying to ascertain whether or not it would be safe to finish and whether or not there's going to be a surge of more inflation and whether stagflation can set in. That's, I think, their major concern.

Jeffrey Buchbinder (07:11):

You're getting a little ahead of our agenda there, Quincy, you just couldn't wait. You wanted.

Quincy Krosby (07:15):

You asked me that question.

Jeffrey Buchbinder (07:16):

You wanted to talk about.

Quincy Krosby (07:18):

I'm out in Seattle. I could say what I want, the individual rules out here.

Jeffrey Buchbinder (07:23):

We're on what you have to say. We just haven't gotten to our Fed story yet. Oh, okay. But certainly it's tied in, it's tied into rates. So here's the fixed income and commodities performance. And you know, you see just negatives across the board, right, with the one week returns for bonds all down. And you know, that was the move higher in rates. So I don't really think there's too much more interesting to say about that other than the fact that you really aren't seeing much widening in credit spreads.

Quincy Krosby (07:55):

No

Jeffrey Buchbinder (07:55):

More on that in a bit. But that's a good sign too.

Quincy Krosby (07:59):

Yeah, very good sign. Yeah, right.

Jeffrey Buchbinder (08:01):

The bond market is saying growth's fine, economy's fine. Maybe a little too strong <laugh>, but it's not you know, there's not a negative growth signal coming out of the bond market, certainly. Then you know, turning to commodities, the precious metals have been struggling with the strong dollar and the rise in real interest rates. So, inflation adjusted interest rates and we think that choppiness may continue. So precious metals is not an area we're as interested in now in fact, we downgraded precious metals on our monthly asset allocation outlook last month to a neutral. And we think the industrial metals look better, and we think energy looks better. So that's that. Well, China's been holding up. We could touch on China at the end if we have time.

Jeffrey Buchbinder (08:54):

So, here's the S&P 500. I put in Adam Turnquist's more technical look at the S&P because I thought it would be interesting to look at some of these other dynamics, not just, you know, where it is relative to its 200-day. The good is here is that S&P is above its 200-day, so it's in an uptrend. And but also interestingly, it's oversold. So that's the RSI 14 that you see in the bottom two panels here. You have a very you have a high percentage of stocks below 30, that's oversold on the RSI 14, right? I mean, it sounds like a low number. It's 13, but that's historically high. You see these light blue bars, it hasn't gotten really higher than that since the lows in 2022.

Jeffrey Buchbinder (09:52):

And then you go back down one more chart to the RSI 14 for the S&P 500, it's at 34, so pretty close to oversold conditions at 30. Not quite that trigger. Not a compelling buy signal, but still, not yet, right? Not yet, but still oversold. We're down a little bit today on the move hiring rate. So this is, you know, setting up for what I would call just a period of consolidation, right? And then 4,200 to 4,300 is still support. But you know, there are levels above that where, I mean, we're pretty much at 4,300 now, pretty close. There are levels above that that are resistance. So, it just paints kind of a neutral, choppy, sideways, kind of a picture which has really been our view for the last few months, frankly.

Jeffrey Buchbinder (10:44):

But we'll see if we get that seasonal lift. Let's keep moving and go to the shutdown. So, I want your thoughts on this, Quincy, because you know, I'll assume we're going to be in the same position in mid-November, right? We kicked the can down the road. It's hard to see a deal. You know, maybe the McCarthy variable changes the formula a little bit in mid-November. Not sure, we'll see whether he's still speaker. But I guess the question is, what's going to change between now and mid-November that could give investors hope that, you know, we won't have to deal with this.

Quincy Krosby (11:29):

Well, yeah. Well, I mean, just from a granular political level, if Trump maintains his lead, he could come in and just basically tell the seventh, that's the caucus. The group that, believe it or not, on the 15th ballot, they're the ones that brought McCarthy into the leadership, into the speakership, but they extracted a number of promises from him, which he has not delivered. So, if Trump comes in and that's something that, you know, it's a possibility, that they could, come in could either save him or work with the seven and to say, stop it because it's going to hurt the party. All what you saw coming into the weekend were reports that even the senators, the republican senators got involved with the seven and basically made it clear it's about the party right now. It's about the party. So, that could be a game change. And the other game change could be that gets actually gets McCarthy out, right? And that's the other possibility. And that perhaps then this does continue, but the expectations overall, by the way, are that between now and then, they could actually work on a deal, a more viable deal, come in with some cuts to the Ukraine side deal but be more prepared as they get towards that November deadline.

Jeffrey Buchbinder (13:14):

Yeah, I like that little bit of a dose of optimism. I mean, not that I'm rooting for McCarthy to be ousted, but well, at least it's a path for a bipartisan deal potentially. Yeah, there or not. And they, I mean, this was bipartisan to kick the can. So maybe you can make an argument that bipartisan the 45-day extension is an example of you know, a bipartisan agreement that could maybe lead into some more cooperation down the road. We'll have to see <laugh>, but boy, it's yeah, it's a tricky one, so we'll keep watching that. I mean, maybe the other piece of good news here is that the stock market tends to shrug these off anyway. Yeah. I mean, obviously it was down last week and it was down in September.

Jeffrey Buchbinder (14:05):

Seasonality was part of that. The Fed higher for longer message was part of that. The shutdown fear was part too, but it certainly can't be blamed for all of the recent weakness. So I don't think this thesis is broken. If we do get an actual shutdown, we think the market will look past it and probably hold up pretty well. The average, these go back to 1976. This is Strategas data. The average S&P 500 performance during a shutdown is flat, and the average one month post shutdown is up about 1.4%. So we'll take that if we get it. Certainly we don't think this is anything to fear if it does happen. So let's move on to prospects for a Q4 rally. And I mean, these, you know, we'll bring in some more optimism if the talk of a government shutdown has you down. The fourth quarter on average is up 4% since 1950, over 4% based on the S&P. The batting average is about 80%.

Jeffrey Buchbinder (15:13):

So, four out of five years, the fourth quarter is higher. These are excellent odds, much better than the Q3 seasonality that we just came out of. I don't think the presidential cycle changes these numbers dramatically, but I think the fourth quarter average in year three of a presidential cycle's a little bit lower. So at any rate, this seasonal tailwind is powerful. And the question is, you know, are we going to get it this year? You know, another way to see this is to look at the average progression of the S&P by year. This also goes back to 1950, and you see that we're at a really good spot, <laugh>, we're pretty much at the average low of the back half, right? So this is by trading days. This chart you're looking at. I think we're around 190.

Jeffrey Buchbinder (16:07):

So if you have, on average, right before the 191st trading day of the year, you tend to bottom and start this nice rally up for Q4. So it doesn't happen at the very start of October. It's like, I think it's like 10 days into October, right? Yes. Right. Where you really take off seasonally. But you know, this is certainly good news. So I think the question, Quincy, everybody's asking is this going to play out again? And so we wrote a Weekly Market Commentary this week on this topic. You can find it on lpl.com. And, you know, we make the point that rates is really the key here, right? If rates keep going higher, then it's unlikely we're going to get the stock market higher. The correlations of stocks and yields are as high as they're going to get. And so we got to get yields down. So that's the key. But outside of that frankly, we think the prospects for this are fairly good. Because, you know, the economy's holding up fine, earnings seasons coming, we think it'll generally be good relative to expectations. And, you know, valuations have adjusted, right?

Quincy Krosby (17:25):

Yes, they have. Certainly.

Jeffrey Buchbinder (17:26):

We're not at 22 times, we're at 18. And, you know, if rates come down, I should go back to where I started, rates come down, probably going to get that fourth quarter rally. Maybe those other factors don't matter. What do you think, Quincy?

Quincy Krosby (17:41):

Well, you know what? Look, as long as you can get some very nice returns in the treasury market, money market funds, the market has to do, the market has to work, the market has to work for input. It does. It's been so easy for the market with quantitative easing underpinning the market so many years now, right? So now the market has to fight for it. And that may be why you see the big mega tech, you know, in the green, right? That they're in the green and the market is down with these higher rates. The market, the few from that, if that continues to, well, those companies outperform, those companies have rock solid balance sheets. Those companies have the technology that other companies want or investors want. And if that continues, that would have to be, that would have to be the message from the market.

Quincy Krosby (18:44):

However, the one thing that we focused on is, are we going to have a repeat of just the generals leading the market higher and not the rest of the market? Now that, I mean, you know, look, at the end of the day, the price action will be the price action, but it's not a healthy market if it's that narrow. And at least Jeff, as you know, we talked about it so often, the market performance feeding into the end of the first half actually broadened. We saw the Russell 2000 actually not green for one day. I mean, it actually, it actually gained momentum. And that, I think was a sign that the Russell 2000 saw the economy on solid footing, and basically it moved beyond the financial crisis in March and started to broaden the overall market. And that's something that we applauded. Now we're back to, wait a minute, is it just going to be the big seven leading the market higher? And granted it's important, what do they do? They represent nearly 30% of the S&P 500. It's not outlandish to think that it should be dismissed. You know, you're not going to dismiss it. Yeah. I think that's, yeah, I'm sorry.

Jeffrey Buchbinder (20:12):

Oh, good point. Yeah. The percentage of stocks, I think over their 200-day moving average is down to like 42. That's a pretty, but it's somewhere in the forties. Yeah. That below, I think it, when we had that breadth, that participation improvement, right, right. More stocks working. We had something in the 70 range. So,

Quincy Krosby (20:34):

Yes. Exactly. Exactly. Yeah.

Jeffrey Buchbinder (20:37):

It's a good point. That's a topic maybe we should explore.

Quincy Krosby (20:41):

Well, yeah.

Jeffrey Buchbinder (20:44):

You know, the breadth.

Quincy Krosby (20:45):

You know, there's an old saying. I mean, I learned this when I, you know, started off years ago trade and invest in the market you have not the one you want. And so, if that's what the market offers us, you know, obviously the market begins to accept it. Is it healthy? Would we give it an A+ in terms of health? No, but nonetheless, it's the market's way. This is the way it continues of saying, look, look, we don't know what's going to happen. At least we know that these guys, these companies perform. They've got the strong balance sheet. Because at the same time as you and I discussed Jeff, and we're going to discuss it really soon, it's how strong is the economy? Because why are we seeing recession has come back into play. That's not something we were talking about, we were talking about soft landing for so long, now its recession has come back in to favor.

Jeffrey Buchbinder (21:48):

Well, based on yields. I mean the yield, again, yields are telling a story of stronger growth.

Quincy Krosby (21:55):

Yeah, exactly.

Jeffrey Buchbinder (21:57):

Not recession. So you know, here you see the 10-year yield chart with these technical lines drawn at 4.7 and 4.9, right? Yeah. You know, we just broke four five, I mean, frankly I'm surprised we're up here, but you could still make the case. And we showed this chart a few years ago, or a few weeks ago. If you go back, you know, a hundred years plus,

Quincy Krosby (22:22):

Yes,

Jeffrey Buchbinder (22:23):

Pretty normal level <laugh>, right? It's a nominal GDP level. But I think it's a shock to me and many others that we're here because, you know, we were at a half a percent on the 10-year yield, what, three years ago? A half a percent.

Quincy Krosby (22:41):

It's the speed, it's the speed at which it's cold turkey. It's a cold turkey move.

Jeffrey Buchbinder (22:47):

For the Fed and the 10-year. And so this is just, these numbers psychologically are tough to digest. I think, you know, I would argue that the market's digested these yields fairly well, you know, given we're kind of in that technical range where we thought we would be anyway. And given that tech has still done well, you know, the artificial intelligence enthusiasm is helping, and companies are doing just a terrific job. I mean, there are companies by the way, that benefit from higher rates that have, you know, more cash, more assets than liabilities, right? So the cash on the balance sheet is working for them. So we shouldn't totally just disregard that piece. But, you know, regardless, company's profitability has really been impressive in the face of higher rates. But if they go much higher, I mean, they're obviously going to affect housing related companies, right?

Jeffrey Buchbinder (23:38):

Companies, you know, doing auto loans and things like that. But if that starts to affect just broader consumer spending and broader capital investment you know, that's when, well, first <laugh>, that's when the Fed says, okay, we've done enough. Right? But that's also when the market maybe starts to price in a weaker economic environment. So we have some slides coming up here in this next segment that'll, you know, paint the picture of a little bit of economic weakness here. We're not trying to support a bearish call. We're still neutral equities, but I think it's, some of these charts are really interesting to point out, because I think what we have is the market in the bond land at least saying things are fine or things are good but then you have some economic data that says, you know what, we're poised to weaken.

Jeffrey Buchbinder (24:29):

And you know, maybe Q4 GDP won't be another 3% number, even if Q3 is. So, why might the Fed be done? I guess reason number one, they're getting tighter every day. Yeah, I know we've talked about this a number of times here and in other channels. The fed funds rate, if it stays put while inflation falls, then that's a higher real interest rate, a higher real fed funds rate, and that higher real rate means tighter. Yeah. Okay. That gap, so we had the core PCE come down from 4.2% year over year to 3.9% year over year. The month over month was just a touch better than expected. That is good news. It's still coming down more slowly than we want but is absolutely moving in the right direction. The Fed has clearly talked the market out of all these aggressive rate cuts in 2024.

Jeffrey Buchbinder (25:27):

So, you put those things together, they're in a pretty tight spot. So that's, yeah, first point. I'm going to, I'll run through these quickly, Quincy, and then I'll, I'll let you go comment on any of this. The other point, this is from Jeff Roach, the GDP revision from last week was, you know, typically the third revision isn't newsworthy, but it actually was this time. We had services within the consumer spending drop from 2.2% to 1.0. That is a big drop from a second GDP revision to a third GDP revision. So, I'm not trying to be alarmist, but this is a weaker consumer spending environment than maybe we thought, still overall GDP was up two in Q2, that that's fine and it'll probably be better in Q3, but we're starting off of a lower base.

Jeffrey Buchbinder (26:22):

So keep that in mind. Next, you know, credit card delinquencies 30 days or more have ticked up a little bit. They're still very, very low historically. In fact, they're even low compared to 2019 pre-pandemic. I looked at the 90-day delinquencies, it's the same story. They're ticking up towards pre-pandemic levels, but they're not there yet. Just want to point out, you know, we know credit card balances are high. I think record highs and then delinquency is ticking up. So that's something to watch. Here's a chart of mortgage rates, the average <laugh> mortgage rate. Wow, 7.4%. So, you know, it doesn't matter for folks who are on a fixed rate mortgage who aren't moving, but over time, more and more people will move. And if rates stay high longer for the, you know, folks that are moving this is going to start to hurt.

Jeffrey Buchbinder (27:11):

You've already seen it start to affect home builders. Rates were 2.8% in August <laugh>. Wow. Then the last chart here in this section, then, Quincy, I'll let you comment on this. I didn't put spreads in here, but spreads are pretty tight, you know, for investment grade corporate bonds relative to treasuries. And this is really interesting, this shows how many downgrades credit downgrades S&P did last quarter versus upgrades. And look at the downgrades in red, 210 versus the upgrades in green, only 63. So, and you see it in the bar chart with the reds being the downgrades far outnumbering the upgrades and then the up down ratio very, very low. That's the light blue line. So the point here is the credit environment is getting tougher. You've probably heard people talk about tighter financial conditions, right?

Jeffrey Buchbinder (28:11):

Well, this is more evidence of that. The credit environment is just getting a little bit tougher. So, something to point out, you know, doesn't mean necessarily sell stocks here, but it does mean be careful with your high yield. Be careful with your credit because you know, some of these companies that have to term out their debt in the next couple of years are going to have a hard time. So, Quincy, your rebuttal to this. What's the other side? What's the other side of the story here? I'm making the case the Fed is done. What's the counterpoint?

Quincy Krosby (28:48):

Well, just that I don't think they know whether or not they're done. So, that's, it's not as though they're sitting on their answer and not telling anyone, right? Because I do think they're data dependent. I think they know; they acknowledge that inflation remains high. And again, the core is yes, it came down from four to 3.9, which is psychologically there's nothing better than going from a higher number to a lower number. It didn't go just a tad, but the question is whether or not they have the patience and the stamina to watch it edge lower without the fear of stagflation starting to creep in. They're very, very much worried about a failure of the monetary policy of the 70s. But getting back to this notion about consumer spending, what we saw, the latest data that we saw last week is that personal income rose, and personal spending also rose. The month before we saw personal spending up your personal income down.

Quincy Krosby (30:06):

What we saw last week was that they both rose, personal income rose, personal spending rose. That's good news. And when all is said and done, what really matters is what we're going to hear on Friday. And that is the labor market, because the correlation, the positive correlation between the labor market and consumer spending is about as tight as you can get. And overall, I mean, you know, we're all taught, we are all been taught pay attention to the credit market. One thing I do want to say about the credit market is, I'm incredibly impressed with high yield. Either high yield, either high yield, it's just gone crazy and doesn't know what's going on, or they are sending a signal, hey, stop, stop overreacting. Otherwise, you know, otherwise our spreads would be so wide right now. But I think also that the credit agencies, which was slammed, slammed because of 2008 and 2009, and we know why, because they didn't do their jobs properly.

Quincy Krosby (31:16):

Remember that? They did not do their jobs properly in 2007, 2006 in those looking at the subprime debt related products, they've been going overboard. They've been going overboard now, ever since then, they've been very quick to pull the trigger. And you know, you saw Fitch, you saw so, you know, I look at that grain salt, like suddenly over the years, they've had to be really out there making sure everyone knows, oh, we're doing their job because they spent too many years not doing their jobs. So, in any event I want to see how the labor market performs, and let's remember something because we talk about the labor market as if it's in a vacuum. It comes from the earnings, it comes from what companies are going to tell us. Because if the companies tell us that their margins are coming under increasing pressure, they're going to have to get to that bottom line by doing something.

Quincy Krosby (32:27):

And that typically involves cost cutting, and that then usually leads to the labor. So we've been going through the earnings season and Jeff, as you always point out, the companies have been holding up. Has it been stellar? No, but it's been solid, and we have not seen dramatic pressure on the margins. Once you do, that's why they always say that when the labor market goes, it could go very quickly. The cracks can just, can spread very, very quickly. It's because suddenly companies find themselves under tremendous pressure and they run around and they, first thing they want to do is start laying people off because that's where they can bring those margins back and have the margins intact again. So that's why the earnings season is going to be so crucial to the thread from the earnings to the labor market to consumer spending. And I think that's where we're going to have our clues as to where we are headed at the end of the year and especially in early 2024.

Jeffrey Buchbinder (33:34):

Yeah, absolutely. On the job report anything in the ones is probably fine, but you know, you don't want a 300 to come out of nowhere and scare the Fed. So that's,

Quincy Krosby (33:46):

Exactly. Consensus right now is 170. That's consensus.

Jeffrey Buchbinder (33:53):

Yes.

Quincy Krosby (33:54):

Right now.

Jeffrey Buchbinder (33:55):

That's why I put the week ahead preview on the screen. So you could see that on the right, on Friday, October 6. And then, you know, we'll watch average hourly earnings. Hopefully those don't tick up. I mean, some people think that the rise in energy prices is going to seep in to, you know, inflation in other categories in core categories. So hopefully we get a good labor cost number there and we can, you know, get a little bit of a relief on the energy price side and we can stop worrying about higher oil prices creating stagflation from the 1970s or anything like that. But there's just no doubt that that is the big report of the week. And it can influence yields. We want to see more productivity, we want to see sort of, steady, we want to see steady job creation or maybe a little bit slower job creation and we need wages, wage pressure to come down just a bit.

Jeffrey Buchbinder (34:51):

By the way, the ISM this morning, we got a great prices paid. From 48.4 to 43.8, that is a big drop. So, you know, it's just manufacturing, which is a small piece of the U.S. economy, but great to see that inflation reading come down. And at the same time, we got a nice uptick in the manufacturing activity index. Yes. 47.6 to 49 that's good to see. 49 is still below 50. Of course, it's still a contractionary reading, but it's moving in the right direction. So that's good to see. So, we got some good data. The bad news, right? It's good news is bad news right now. That certainly contributed to the move higher in yields along with the, you know, averting, the government shutdown. And I'm sure some traders are factoring in more government spending, and you ended up, you know, at going from 4.6 to 4.7 on the 10-year in a hurry.

Jeffrey Buchbinder (35:49):

So, we just need a little more cooling and more months of better inflation data. It's just going to take patients. So, I think the ISM services number that I highlighted here is the only other number that really matters. Oh, yeah. All that much in all of the data for the week. So, we'll of course be watching that. Just, you know, that survey is newer, you know, it doesn't have the history that the manufacturing index has, so it doesn't get as much attention, but services is, you know, what, 65, 70% of the economy, yeah, it's a much bigger piece than the manufacturing side. So yeah we'll definitely be watching that as we watch yields. So anything else Quincy to highlight before we wrap? We covered a lot of ground, I think.

Quincy Krosby (36:39):

Some of the Fed speak, I think we want to pay attention to Loretta Mester. I seem to have picked up a cold like in past two minutes. Loretta Mester is on the hawkish side. She's highly regarded, I would call her a pragmatic hawk, and she's speaking, and we want to see what she has to say. She did say the last time she spoke publicly, and we need to be careful. But we want to see if she's moved over into that camp as well, into the camp that says, why not just pause, why not be done with it? We'll see if she's gone that far, because that would be a big move if she moves into that realm, into that camp.

Jeffrey Buchbinder (37:24):

Yeah, good point. I think Powell's comments today, even though it really wasn't about, you know, the fed funds rate.

Quincy Krosby (37:32):

Right, yeah.

Jeffrey Buchbinder (37:33):

QT or anything like that. More of an academic presentation, I guess. I think he might've influenced yields a little bit too. So, good point. We want to watch Fed speak as well for more hints as to whether they're done. Yeah. Or we're going to get one more hike. So, good discussion on that. There's certainly a lot of good debates in there in terms of what the Fed's going to do in terms of whether we're going to get a Q4 rally. So thanks Quincy for joining. Thank you. In a Seattle area hotel <laugh>. I'm glad the audio held up. Thanks everybody for listening to another edition of LPL Market Signals. We will be back with you next week. Everybody have a great week and take care. Thank you so much.