Will FedSpeak Interrupt the Lazy, Hazy, Crazy Days of Summer?

Will FedSpeak Interrupt the Lazy, Hazy, Crazy Days of Summer?




by Jeff Miller, A Dash of Insight

In one sense, the week ahead should be a quiet, dull semi-vacation. As Nat King Cole explained, the Lazy-Hazy-Crazy days of summer – pretzels, beer, and bikinis that never got wet.

It is the lull before earnings and includes a light economic calendar. Will the A-Team need to return from the beach because of Greece? Or will it be a quiet week, disturbed only by an avalanche of FedSpeak and consequent punditry?

One way or another, I think we will (finally) put the Greek drama behind us and resume the familiar debate about the Fed.

I expect the pundits to be interrupting our summer with discussions of the FOMC minutes and the record number of Fed speeches.

Will FedSpeak Upset a Quiet Market?

Prior Theme Recap

In my last WTWA I predicted that market participants would concentrate on Greece at the start of the week and then turn to economic reports. This was mostly correct. The Greek story lingered, but the biggest impact was on Monday. The economic news was supportive for most of the week, but the employment report was more of a dud than a firecracker.

Meanwhile we have to deal with Greece again this week. As usual, Doug Short’s excellent five-day summary captures the story in one great chart. Read the full article for more charts and discussion.

SPX-five-day

Feel free to join in my exercise in thinking about the upcoming theme. We would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react. That is the purpose of considering possible themes for the week ahead.

This Week’s Theme

Trying to predict this week’s theme is a real crapshoot. With the Greek referendum on Sunday, and polls showing a tossup, the market story will take one of two quite different courses. By the time you are reading this, the result will be known.

In the absence of that knowledge, I will make some educated guesses. If the referendum passes, it will have a calming influence on markets and a big bounce. If it fails on a close vote, there will still be plenty of pressure for a negotiated solution. In either case, I expect the story to lose traction during the week ahead.

While we have the official start of earnings season with the Alcoa report, that theme will command more attention next week.

As a result, the field will be open for those pundits who are not on vacation to speculate and pontificate. Wednesday’s FOMC minutes will provide fresh information on a favorite topic. In addition we have speeches by at least seven (is this a record?) different Fed Participants in the last three days of the week, including Chair Yellen. That will provide plenty to talk about.

Will FedSpeak Upset a Quiet Market?

The Viewpoints

The media time and space must be filled, but do not expect anything fresh.

Jeff Gundlach says to ignore the bond pundits, especially those on CNBC.

As always, I have my own ideas in today’s conclusion. But first, let us do our regular update of the last week’s news and data. Readers, especially those new to this series, will benefit from reading the background information.

Last Week’s Data

Each week I break down events into good and bad. Often there is “ugly” and on rare occasion something really good. My working definition of “good” has two components:

  1. The news is market-friendly. Our personal policy preferences are not relevant for this test. And especially – no politics.
  2. It is better than expectations.

The Good

There was plenty of good economic news.