1. Interest Rate Decisions This Week
This is a very busy and important week when it comes to interest rates.
On Wednesday, we get rate decisions from the Federal Reserve and the Bank of Canada.
Both are expected to cut, and I have a feeling it’s only 25 basis points vs. a big 50bps cut. But let’s see.
I think Canada needs a bigger cut vs. the U.S.
Also, keep in mind that sometimes the first few cuts after a while can hurt.
2. Market’s Reaction to Rate Cuts
The stock market is very happy about the upcoming rate cuts, and it has essentially decided that a lot more cuts are coming.
Stocks are acting like nothing is wrong, and fear has essentially gone out the window.
Markets will move on rate noise, especially after the rate announcement.
But keep in mind that a lot of times the initial move is wrong.
Be very mindful.
3. Key Economic Data: CPI & Retail Sales
While the interest rate decision is big, for Canada, we get CPI data on Tuesday.
Plus, we also get U.S. retail sales.
Why do these numbers matter?
In Canada, the inflation rate remains somewhat sticky. Plus, this is happening as the Canadian economy remains in a very dire shape, with sentiment down the drain across the board.
For the U.S., retail sales matter because the American consumer is pessimistic, and the economy seems to be rolling over.
4. Silver’s Wild Card Potential (not a recommendation to buy/sell — do your own due diligence)
You see, silver tends to have a super high correlation with gold. But here’s the thing: silver tends to lag a little bit in the early stage of the cycle, but it really moves a lot in the late stage.
And when I say “really moves,” it doubles or more within months.
This played out in the bull run in the late 1970s. Then, a similar thing followed in 2010–2011.
Now, will a similar thing follow?
Silver is already up well over 100% since the 2023 lows, but momentum has really picked up since June of this year. The biggest test is if silver goes to $50.00 and breaks above it. If yes, we may be in for something extremely wild.
Mind you: parabolic moves sometimes end in a stellar way too. So, if this plays out, the downside will be worse when and if it happens.
5. Global Markets & Dollar Weakness
The dollar index continues to lose strength.
Bitcoin setting up for another move higher? Held the 50-day moving average really well.
Slowdown in China seems to be worsening. But have you looked at Chinese stocks? Flying a bit over the past few months. The Shanghai Composite seems to be breaking out. It remains well below its 2015 or 2007 highs. Potentially, Chinese stocks are moving in hope of some more stimulus and money printing.
Japan’s stocks are trading at all-time highs. Broke above 1980s highs. September will be the sixth consecutive up month if it closes higher than it opened. Impressive.