Daily flows are shrinking, and we haven't even really started into the full cuts in unemployment benefits (after Labor Day), although some states, due to calendar issues, are already ending them.
The 10-day average of daily flows dropped to $24 bln. This is the lowest level since mid-July when they bottomed out because the Child Tax Credit payments started going out.
This looks like it will only get worse as the full cuts progress after Labor Day.
I am advising defense (short market, raise cash, puts, etc) at this time.
Stock market is now in a phase of discounting slower economic growth. (Due to slowing fiscal.)
More downside.
You can buy downside action like SPXU, SQQQ or puts or something of that nature.
This is a good and healthy thing. Fiscal support is unlikely to fall much below $600 bln per month, and that's still huge historically speaking. It's just not the same as Q1 and Q2 average monthly spending of $722 bln. It's a reduction of about 17%.
So if the stock market were to correct that much or slightly more, it would set up an excellent buying opportunity.
Bonds should trade higher on weakening economic outlook.
More downside.
You can buy downside action like SPXU, SQQQ or puts or something of that nature.
This is a good and healthy thing. Fiscal support is unlikely to fall much below $600 bln per month, and that's still huge historically speaking. It's just not the same as Q1 and Q2 average monthly spending of $722 bln. It's a reduction of about 17%.
So if the stock market were to correct that much or slightly more, it would set up an excellent buying opportunity.
Bonds should trade higher on weakening economic outlook.