"The Yield Curve Setup That Could Send Small Caps Soaring"

"This Yield Curve Pattern Preceded Every Major Bull Run in Small Caps"

KR Opinion

As we head into Tuesday, markets continue to display the same choppy, sideways price movement that has characterized recent sessions. As I mentioned during my live stream last night, I believe we are essentially stuck within a broad sideways trading range for now. However, the underlying potential within that range remains positive. The intermediate database continues to show positive readings, comfortably in the upper 65th percentile on a bullish scale, indicating the current bias still leans toward the upside. Despite this sideways consolidation, expectations remain that prices will move higher as we get closer to the Federal Reserve meeting next week.

Market participants are currently pricing in roughly an 80% chance of a 25-basis-point rate cut at the upcoming meeting, and this expectation has already been largely reflected in current price levels. Since this anticipated cut is mostly priced in, it seems likely that markets will remain relatively stable as we move through this period. The market has already discounted this policy move, which should help limit significant volatility around the actual announcement.

There are also growing discussions about Kevin Hassett potentially becoming the next Federal Reserve chair. While some suggest he might serve as a political tool for the administration, it’s worth noting that Hassett is not an unknown figure within Federal Reserve circles. He has a reasonable amount of credible experience and positive credentials built up over the past several years, which should reduce some of the more cynical views of his possible appointment.