September 2024 Commentary

Cut to the chase

*This abbreviated commentary is accompanied by a special post “A New Option For Hedged Equity”

After a shaky start, stocks rallied to fresh all time highs in September, juiced by an aggressive 50bps interest rate on Sep 17th, the very same day that kicked off the notorious 2007 rate cut cycle which culminated with the 2008 Great Financial Crisis (chart).

S&P 500 Index, Apr 2007 - Dec 2009.  Source: barchart.com, St Louis Federal Reserve.  Click for larger image

Historical coincidences aside, this example serves as a reminder of the impact of monetary policy on risk assets that according to the Fed itself, works on “long and variable lags”. After stressing the system with the longest yield curve inversion in US history, the central planners at the Fed are now attempting to bring the largest pile of debt in world history in for a “soft landing” and the stakes for markets have likely never been higher.