One of my favorite movies is Groundhog Day. Laughingly, I have seen it over and over again. However, as clever as I perceive the movie to be, actually having to relive the same day countless times is rather monotonous. I know this to be true, because that is exactly what has been happening in the investment industry for what seems like forever.
- Tariffs and global trade wars? So what? Through 9:52 am CDT on 6/20/2025, the S&P 500 is UP 6.34% for the quarter.
- Israel and Iran break out in a ‘hot war’ during June? Through 9:55 am CDT on the same day, the S&P 500 is up 0.90% for the month, and the NASDAQ is up 1.65%.
Sure, there has been some volatility since the missiles started flying and bombs started falling a couple of weeks ago.
However, where the rubber meets the road, the stock markets have largely ignored a somewhat terrifying situation in the Middle East.
- Gaza? Ukraine? By this point, the markets really don’t care. That is, if they ever really did.
- Finally, for the purposes of this list, what about all of the riots out in Los Angeles? Fiddle-dee-dee. That is just what they do out there.
Shoot. Things seem so akilter, from stem to stern, I would hate to be the mayor of either Oklahoma City or Indianapolis right now. After all, there is a real chance one of those cities will be reduced to cinders after the local team wins the NBA Championship this Sunday evening.
Kids these days and their celebrations.
Currently, the only thing which seems to matter to investors is the Federal Reserve, and potential changes to monetary policy. For its part, the Fed cares about its dual mandate of price stability and full employment. As a result, pretty much everything in the investment industry has boiled down to the official inflation and employment data, and, of course, the once-every-6-weeks Federal Open Market Committee (FOMC) meetings.
Will they or won’t they cut the overnight rate? If not, will it impart any wisdom to give us a better understanding of when it will?
The ISM Reports on Business? The quarterly GDP report? Durable Goods Orders? Advance Retail Sales? Leading Indicators? M2? Industrial Production? Monthly budget balances and trade deficit? TIC flows? Really, any economic report other than the Employment Situation (specifically the headline nonfarm payrolls and unemployment rate numbers), the Consumer Price Index (CPI) and/or the Personal Consumption Expenditures Price Index?
Unless a “secondary or tertiary” economic release is incredibly out of whack, and I mean many standard deviations away from the mean or median estimate, investors don’t seem to care. Even then, their attention is pretty short-lived.
Over the decades, I have over-analyzed economic releases with the best of them. I have seen plenty of economic reports fade in importance. Shoot, we used to care a lot about the federal budget deficit—seriously. The Philly Fed report (as we used to call it) was also important, as was the Empire Manufacturing survey. Heck, folks used to pay serious attention to the Producer Price Index (PPI YOY).
Silly us.
For grins and as a point of elucidation, 28 “qualified economists” put in an estimate for the most recent “Empire Manufacturing” survey. Twenty-one did so for the PPI YOY. Only 11 bothered to put anything down for the federal budget debt summary. Finally, there were zero “qualified economists” who bothered with either of the Export or Import Price indices (YOY), which I decided to throw in for good measure.
Conversely, 67 took a stab at the most recent “U.S. employees on nonfarm payrolls,” and 63 put down a guess for the official Unemployment Rate. For its part, the “U.S. CPI urban consumers YOY” survey garnered 44 “qualified” respondents. Finally, and this is the whopper, a total of 82 folks submitted a prediction to the Bloomberg survey for this week’s FOMC meeting, and any changes to the overnight lending rate.
This “focusing of attention” to so few economic reports means the markets have been largely stumbling or staggering from the Employment Situation report to the CPI to the Personal Consumption Expenditures report to the next FOMC meeting. Seriously. Of course, there have been some outlying trading days, like the ones immediately following the President’s so-called Liberation Day.
Where push comes to shove, investors have narrowed their attention, almost to the point of myopia, to several data points and periodic central bank meetings. To be sure, these are very important—undeniably so. However, as Hamlet might say: “There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy.”
The reason I say this is pretty simple. While the members of the FOMC set monetary policy for the world’s most important economy and financial system, that doesn’t mean they are always right. In fact, history might argue that the FOMC gets things wrong fairly often, but my purpose today isn’t to badmouth the Federal Reserve.
It is simply to bemoan the fact that “we” have been waiting on the next Fed rate cut for so long, investors don’t seem to care about anything else. A lot of the economic data is pretty weak; if not weak, then noticeably softer than it was. The U.S. Treasury is flooding the global markets with debt, as are most other “developed” countries. The world seems to be on the verge of World War III, with countries at each other’s throats. All of it, and investors don’t seem to be paying much attention.
After all, the only thing which matters is the Fed’s next move, and the only things the Fed seems to care about are inflation and the labor markets. And so we spend another day in the markets, waiting until the next aforementioned report.
It truly is like Groundhog Day over and over again.
In the “for what it is worth” column, the FOMC missed a wonderful opportunity to cut the overnight rate this week. It should have done so, and the “upper band” should be at 4.00% as I type here on 6/20/2025. It isn’t, and the longer the FOMC postpones the next move, regardless of short-term reason, the greater the negative impact to the economy.
Thank you for your continued support. As always, I hope this newsletter finds you and your family well. May your blessings outweigh your sorrows on this and every day. Also, please be sure to tune into our podcast, Trading Perspectives, which is available on every platform.
John Norris
Chief Economist
Please note, nothing in this newsletter should be considered or otherwise construed as an offer to buy or sell investment services or securities of any type. Any individual action you might take from reading this newsletter is at your own risk. My opinion, as well as those of our Investment Committee, is subject to change without notice. Finally, the opinions expressed herein are not necessarily those of the rest of the associates and/or shareholders of Oakworth Capital Bank or the official position of the company itself.