Weekend Wall Street #53 - FOMC and Wall Street Was Wrong (September 18-22)
Happy Sunday everyone and welcome back to Weeknd Wall Street. The market fell last week by 0.10% after CPI and PPI data both came in hotter than expectations. We have more from the Fed this week that should impact markets.
Let’s take a look at what this week has in store!
Many believe the FOMC meeting this week will give the market a more clear look on what we can expect, although expectations are mostly priced in with a 99% chance of no rate hike as they believe rates will remain steady now and through the end of the year. University of Michigan's reading on consumer sentiment fell as well last week. The Fed will meet on September 19th and 20th, and on Wednesday, Fed Chair Powell will host his FOMC press conference at 2:30.
Wall Street has been *so wrong* about their analysis for the S&P 500 this year, and we are finally seeing some analysts shift their views. In fact, along with the many other analysts that changed their price targets into the second half of the year, Mike Wilson from Morgan Stanley said he was too bearish although still believes there will be another 10% drop before the end of the year. Data from Deutsche Bank shows that although investors may have been overexposed into the first half of this year, positioning is now more neutral. Below is their chart on asset allocation:
The Wall Street Journal had a great article that can lead into an actionable trade idea about airline stocks and how low ticket fares are squeezing them. Domestic flights are losing face with expensive ticket costs, and many passengers are opting to travel to Europe instead- forcing domestic airlines to drop costs when they can’t really afford to. Last week, Spirit Airlines said it had to offer “steep discounts”. The cost of fuel has increased, labor contracts mean labor costs have increased, and the borrowing money from the pandemic is faltering.