Weighing the Week Ahead: Is Falling Confidence a Threat to Markets?

The economic calendar is more important than usual. There is an emphasis on housing data as well as reports on leading indicators, industrial production, and regional Fed surveys. The most important story of the week will be the Fed’s Wednesday rate decision. Market prices imply a high probability of a 25 basis point rate cut. Many market participants are counting on the Fed, but the real question is broader. Pundits should be asking:

Is falling confidence a threat to markets?

Last Week Recap

In last week’s installment of WTWA, I asked whether it was time to worry about crowded trades. That was indeed the question on financial news to start the week. Hunting for Cheap Stocks is Back in Favor. A massive market rotation called into question much of the “wisdom” of the last few months. Interest rates rose, the yield curve steepened, and value stocks rebounded versus momentum. Now, of course, the popular question is whether this “has legs.”

The Story in One Chart

I always start my personal review of the week by looking at a great chart. This week I am featuring the Investing.com version. It is static in this report, but if you go to the site you can use a number of interactive features. For those who want to explore the effect of specific events, there are news callouts.

The market gained 0.9% for the week. The trading range was 1.8%. The index chart conceals the biggest story – a massive rotation reflected by big sector moves.

News You Can Use

Dr. Brett Steenbarger’s new book is now available! Radical Renewal: Tools for Leading a Meaningful Life is innovative in both form and content. While he emphasizes traders, his work has implications for everyone. The format makes it especially user-friendly. When I finish reading, I’ll do a more complete review, but what I have seen so far is great. Dr. Brett has begun a series of regular blog posts on topics from his new book. It is an easy way to get started.