Market Nosedive: Top or Just a Dip?

Plus: Fed Rate Cut Bets, Treasury Surge, and Redneck Bank's Miami Gamble ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ Forwarded this email? [Subscribe here]() for more [Market Nosedive: Top or Just a Dip?]( Plus: Fed Rate Cut Bets, Treasury Surge, and Redneck Bank's Miami Gamble [Josh Belanger](joshbelanger) Jul 17 joshbelanger   [READ IN APP](   After the S&P 500 hit new highs, there was nowhere to go but down. Today, it slid 1.39%, with the Nasdaq 100 dropping even more at 2.94%. Goldman Sachs strategist Scott Rubner cautions, "I am not buying the dip." He highlights that this day often marks a turning point for equities, citing data back to 1928. What's next? August—the notorious month for outflows from passive equity and mutual funds. With weak seasonality, stretched positioning, and all the good news and rate cuts already priced in, it’s a bumpy road ahead. Traders Bet on Three Fed Rate Cuts in 2024 Generated by AI. Why it matters: Traders are confident the Federal Reserve will cut interest rates three times this year. Goldman Sachs supports this outlook, signaling ripe conditions for easing. The Details: - Two quarter-point rate cuts are priced in for 2024. - Odds of a third cut hit 60% on Monday. - First cut expected in September, though July is possible. Zoom In: - Softer employment and inflation data for June fuel expectations. - December contracts show a policy rate of about 4.71%, indicating two cuts and part of a third. - Monday’s contracts priced more than 60% odds of a cut, especially after Goldman’s Jan Hatzius suggested July could see a reduction. Big Picture: - Demand for October federal funds futures contracts hit record levels. - Trades assume a quarter-point, if not half-point, cut in September. - Fed Chair Jerome Powell hints at possible cuts but remains non-committal. Bottom Line: The Federal Reserve’s next meetings are on July 31, Sept. 18, Nov. 7, and Dec. 18. Market bets on rate cuts reflect optimism for economic easing, contrasting the start of the year when six cuts were anticipated. Search for Safety: Treasurys Soar Despite Massive Supply Generated by AI. Why it matters: The U.S. fiscal outlook is worsening, but Wall Street isn’t flinching. U.S. government bonds are rallying despite the ballooning debt. The Details: The U.S. fiscal 2024 budget deficit is expected to hit $1.9 trillion, up from $1.7 trillion last year. This surge requires the government to sell more Treasurys. Despite this, U.S. government bonds rallied, with Treasury yields dropping from their 2023 highs. Analysts are surprised the growing debt hasn’t caused market disruptions. Zoom In: - The larger deficit means more Treasurys need to be sold. - Normally, more supply drives down prices and pushes yields higher. - Rising yields increase borrowing costs for the government and drag on stocks by providing a safer investment alternative. Big Picture: In August, Treasurys saw a sharp selloff after the Treasury Department raised its borrowing estimates, spiking yields. Yet, the 10-year note yield, which peaked at around 5% in late October, fell below 3.9% by year-end. Despite the rising deficit, the 10-year yield is currently around 4.2%, with the total outstanding Treasurys topping $27 trillion. Bottom Line: Investors are drawn to Treasurys for their safety and liquidity. Despite the increasing supply, demand remains strong due to Treasurys offering reasonable returns with minimal risk. Analysts warn that while demand is strong now, it might not remain so indefinitely. The Treasury market's stability relies on global demand and economic factors. Redneck Bank's High-Stakes Gamble on Miami's Luxury Market Why it matters: Bank OZK is betting big on Miami’s luxury real estate market amid rising concerns over its exposure to commercial real estate. The Details: Shares in Bank OZK dropped 20% in May after a Citigroup analyst highlighted its exposure to the troubled commercial real estate sector. Despite this, OZK financed the largest property loan in Florida history: $668 million for Miami's Waldorf Astoria, a 100-story condominium. Zoom In: - High-end Miami condo inventory is up 40% in the past year. - OZK is heavily concentrated in the boom-and-bust Florida housing market. - 200 loans make up over 50% of OZK’s total loan book, raising alarms about concentration risk. Big Picture: Founded in rural Arkansas, OZK has become a major player in Miami's real estate market. It has grown from $7 billion to $36 billion in assets over the past decade. The bank’s aggressive lending contrasts with its peers who are more cautious in the volatile real estate market. Bottom Line: OZK’s strategy involves high-stakes lending, banking on Miami’s luxury condo market despite potential risks. Its significant exposure to this sector raises questions about sustainability and long-term viability, especially as the real estate market shows signs of cooling. Quick Sizzles - Commercial Real-Estate Meltdown Strains Debt Deals: Defaults in commercial real estate bonds are rising, raising alarms about the future of offices and malls across the U.S. - Cold-Storage Firm Plans IPO Up to $3.85 Billion: Lineage Logistics aims for a major IPO, potentially raising up to $3.85 billion, positioning it among the year's biggest listings. - Gold Hits Record High on Fed Rate Cut Bets and Trump Surge: Gold prices soared to a record $2,465 per ounce, driven by expectations of Fed rate cuts and a potential Trump re-election. - Ackman Touts Social Media Clout in $25B IPO Push: Bill Ackman leverages his social media following to attract investors for Pershing Square USA's $25 billion IPO. - IMF Warns of ‘Bumps’ in Inflation Battle: The IMF cautions that stubbornly high services prices could delay interest rate cuts, raising concerns over prolonged inflation. POLL Was today's market sell-off an opportunity to buy the dip or a sign of a market top? 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