Littlejohn Financial

Data Suggests More Downside

Overall, the data still suggests more downside pressure this week.
Futures show a slight upside bias to the morning. However, the VIX remains stubbornly low, and the ‘big’ hedge that JPMorgan placed on the S&P 500 for the quarter is below current values. Pair this with the upcoming expected rate hike this Wednesday and there is still pressure to bring this market down further.
The narrative has been pretty disjointed. For a little bit, there was a relief-ish rally based on optimism the Fed may be near the end of its tightening (aka interest hike) cycle. But the economic data continues to suggest inflation is high. So this theory has been a bit shaky.
The data point that seems to stay under everyone’s breath is unemployment. It’s not a guarantee that’s the critical line in the sand, but it’s a good bet. Until we see job losses start to pile up, there’s little to reduce pressure on wage inflation. And wage inflation is probably the biggest overall factor to consider for future inflation.
This puts the Fed in a tough spot. They’d like to ‘talk’ this economy into line without having to push policy measures too hard. So certainly verbal guidance is part of the game. But the reality is, this data has at times moved a lot faster than they expected. And in other cases, it’s been a lot more stubborn than planned.
Examples include the stubborn inflation figures and mortgage rates. One won’t drop while the other keeps climbing. The growing gap only creates more strain on the economy.
Certainly something will give. The question is, what?  Many are hoping it is the Fed’s rate-tightening cycle. But the stubbornness of the labor market suggests this may take a while longer.
All this is to suggest the overall economic health of the country — and for that matter, the globe — is in question. When taking into account the macro picture, along with the technical indicators of the market that suggest there is still short-term downside risks out there, it’s tough to get too optimistic right now.  It looks like downside pressure with support about at about 3840 for the SPX this week.


Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Littlejohn Financial), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Littlejohn Financial. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Littlejohn Financial is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Littlejohn Financial’s current written disclosure statement discussing our advisory services and fees is available for review upon request.
Scroll to Top