Many have speculated that the Federal Reserve may announce a 25 basis point rate hike when they meet next week. However, whether you think the Fed should or should not raise, with forward-looking economic data near recessionary levels, market expectations for a rate hike have fallen steeply.
According to the CME Group's FedWatch Tool, the current probability of a 25 basis point rate hike on September 21st is now only 12%.
Source: CME Group
Today on our podcast, Moneyball Economics' Andrew Zatlin, one of America's top-rated economic forecasters, said he thinks we are in the “eye of a hurricane” and is forecasting economic trouble and increased layoffs after this holiday season.
We too believe risks have increased for a US recession as early as next year with a wide range of economic data still arguing for a cautionary outlook.
With fundamental data generally poor, September will likely end up being a key month for the long-term technical outlook on the US stock market as we near a major bullish crossover on the S&P 500, something we also saw at the 2003 and 2009 market bottoms.
However, if September/October seasonal market weakness plays out and US stocks fall further from current levels, the long-term bearish crossover (or "sell signal") that occurred in June of 2015 will likely remain in place and add support to Gary Shilling's get defensive recommendation on our podcast earlier this month.
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