The Federal Reserve is planning to refocus on shorter-term bonds. This move means they will buy fewer long-term bonds. Traders have already started to sell some of their long-term bonds. They are preparing for the changes that the Federal Reserve might make. The Fed will not say when they might cut rates. They want to wait and see more data before making decisions.
The Federal Reserve will have more information by September. They will see at least two more inflation reports and unemployment reports. They will also get PCI data. This new information could change the current picture quickly. Inflation is already falling. The PC data last week showed it is getting closer to the target range. If the upcoming reports show lower numbers, the Fed could face pressure to cut rates. Some traders are even betting on a 50 basis point cut by September.
The upcoming US election is also adding pressure to the Fed's decisions. They must consider the optics of their actions in the lead-up to the election. Tech earnings this week are also important. Everyone is watching to see how much money tech companies are making. They are especially interested in anything related to AI.
Microsoft is a key player this week because of its close ties to GDP. They might provide the best insight into how AI is developing and profiting. NVIDIA is another important company, but their earnings report will come at the end of August. Investors will have to wait a few more weeks for this crucial report.
There are also concerns about tech companies in Asia, such as Samsung. They face challenges not only from US tech giants but also from geopolitical issues. The slow growth of the Chinese economy is another concern. People worry that China's economy is not recovering as expected. This situation could affect Samsung and other tech companies in Asia.
The decisions that the Federal Reserve makes in the coming months are crucial. They will impact traders, tech companies, and the overall economy. Everyone is watching closely to see what happens next.