ANDIKA BULLETin 17 SEPT 2024

So i appear to be finally getting over the current flu/cold bug that has been going around. Never got tested so not sure what i had but it nearly 6 days of nasal congestion is to put it mildly - annoying.

I'll also be brief as not much to report.

Everyone is waiting for Sept 18 US time so Sept 19 our time to see just how much the US Fed cuts their interest rates.

Basically the mkts are suggesting there is a now a 70% chance of a 50 bps rate cut.

But there is a ZERO per cent chance of any rate cuts here in Australia!

Remember US stocks (Nasdaq 100 in this case)  and bonds remain decoupled (the latter thinking 'recession' and the former focused on 'rate cuts to save the world')...

The reflexive dichotomy of those two arguments may well come unglued after Powell makes his decision this week - 25bps or 50bps!?

So the performance of the market during an easing cycle ultimately depends on the final destination.

• If a recession is averted, stocks rise by 14% in the 12 months after the first rate cut.
• Alternatively, if the US eventually goes into a recession within 12 months, the median return for the S&P 12 months after the first rate cut is negative 15% (note, on median basis, the S&P has actually rallied into the first the cut, blue rectangle)

Happy Tuesday!

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