Weekly Stock Market Update & SPY Technical Analysis
We began to see it last week, the Trump administration is increasingly focused on the issues hitting American consumers ahead of the midterm elections.
That isn’t meant as a political statement. Markets and politics simply go hand in hand, especially under President Trump. Energy policy, tariffs, regulations, trade deals and geopolitical decisions can quickly move commodities, bonds and equities. And right now, one of the biggest pressure points for American households is energy.
The Trump Administration Begins Refilling the SPR
Venezuela caught a stray earlier this year when Trump and the Department of War moved to strip Maduro of his title as president. The now famous photo of the former Venezuelan leader in a Nike tracksuit became a marker in time, a clear sign that U.S. policy toward Venezuela had changed dramatically.
The conflict in the Middle East disrupted global energy prices and shipping, which has forced the U.S. to tap into the Strategic Petroleum Reserve, drawing it down to its lowest level since the early 1980s. Now we’re seeing the next part of the strategy. The U.S. and Venezuela just announced a massive agreement giving the U.S. majority control over development tied to 65 billion barrels of Venezuelan oil reserves. Trump followed the announcement by saying that Venezuelan crude will be used to begin refilling the SPR.
The administration has an obvious incentive to push energy prices lower heading into the midterms. But 65 billion barrels of reserves doesn’t mean oil is available immediately at that scale. Venezuela’s infrastructure has deteriorated and it takes time and a lot of money to rebuild it. There will be a lot of U.S. companies that benefit from rebuilding the infrastructure, we’ll be covering them as contracts begin to show.
Kevin Warsh at Jackson Hole Symposium
The new Fed Chair Kevin Warsh addressed the globe last week at the annual Jackson Hole retreat that the world’s top bankers, financiers, and economists visit. His speech shook markets, forcing a pullback from the highs that investors rode on the previously reported Nvidia earnings. Why? Because he doubled down on fighting inflation, making it a central focus in his speech. That immediately had an impact on interest rate cut probabilities in September, with markets now pricing in a possible rate hike again.
We’ll be calling his bluff. Warsh knows he cannot justify lowering interest rates in this environment, so he is trying to prepare markets for the “worst” case scenario ahead of the Fed September FOMC meeting, only to keep rates unchanged. This is the most likely scenario. With that in mind, interest rates sway markets, so we can expect volatility between now and the meeting, which is on September 15th-16th. We’ll cover it on the day of with any market implications.
Labor Market Health
Investors will get a peak at how the U.S. labor market did in August, with multiple reports scheduled through the week. The most important and “market moving” is the U.S. Unemployment Rate report, which is scheduled on Friday before market open. We’ll cover it on the day of with any market implications.