Fed's Favorite Inflation Gauge Set To Drop To Lowest Level In Over 3 Years: Is July Rate Cut Possible?
Portfolio Pulse from Piero Cingari
The upcoming release of the Personal Consumption Expenditure (PCE) price index, the Fed's preferred inflation measure, is anticipated to show a decrease, potentially reinforcing expectations of future Fed rate cuts. The U.S. economy grew at an annualized rate of 2.8% in Q2, exceeding forecasts. Market reactions to previous PCE data have been mixed, with large-cap stocks and bonds falling, while small caps outperformed.
July 25, 2024 | 3:56 pm
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NEGATIVE IMPACT
The iShares 20+ Year Treasury Bond ETF (TLT) fell 1.9% following the previous PCE report. The upcoming PCE data could similarly impact long-term bonds, especially if it influences Fed rate cut expectations.
The TLT ETF, which tracks long-term Treasury bonds, reacted negatively to the previous PCE report. Similar market dynamics could occur with the new data release.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
NEUTRAL IMPACT
The Invesco QQQ Trust (QQQ) slipped 0.5% after the last PCE report. The upcoming PCE data could similarly affect tech-heavy stocks, especially if it influences Fed rate cut expectations.
The QQQ ETF, which tracks tech-heavy stocks, reacted negatively to the previous PCE report. Similar market dynamics could play out with the new data release.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
NEUTRAL IMPACT
The SPDR S&P 500 ETF Trust (SPY) fell 0.4% following the previous PCE report. The upcoming PCE data could lead to similar market reactions, especially if it reinforces expectations of future Fed rate cuts.
The SPY ETF is sensitive to macroeconomic data like the PCE index. Previous data led to a decline, and similar reactions could occur if the new data impacts rate cut expectations.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
The iShares Russell 2000 ETF (IWM) outperformed large-cap stocks, closing 0.4% higher after the last PCE report. The upcoming PCE data could continue to favor small caps if it supports rate cut expectations.
The IWM ETF, which tracks small-cap stocks, performed well after the previous PCE report. If the new data supports rate cut expectations, small caps could continue to benefit.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80