Good morning! When it comes to investing, boring isn’t as bad as it sounds. It’s often exactly what you want for your portfolio.

Today’s edition unpacks why it’s a good thing that we’re entering a dull and drab stretch for markets.

Today’s letter is brought to you by Public!

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“No news is good news”

With the Federal Reserve’s jumbo interest-rate cut behind us, the old adage comes to mind as investors face few surprises between now and the November election. 

The stock market, in turn, should see a boring and good few weeks ahead. 

“Historically, quiet macro weeks have been the best weeks for stocks (median return +0.61% vs. a typical +0.38%),” Bank of America analysts wrote in a note Monday. 

Indeed, investors have wasted no time celebrating the Fed’s rate cut. Both the Dow and the S&P 500 notched fresh records on Monday, disregarding historical trends for this being the worst week of the year on average.  

The chart below from Bank of America illustrates implied S&P 500 daily swings based on options data. Neither economic data dumps nor Big Tech earnings come close to the uncertainty expected on election day. 

In theory, that suggests relatively tepid trading to come.

If we lean into the “no news is good news” quip, that’s a positive.

Upcoming inflation or non-farm payrolls data could cause minor ripples in trading, but otherwise investors face few headwinds. 

Now, there is a bleaker angle to unpack here. Bearish commentators have been quick to point out that, outside the pandemic, stocks have crashed the last two times the Fed kicked off a new rate-cut cycle with a half-point cut. 

That was 2001 and 2007.

Yet as Jay Woods, chief global strategist at Freedom Capital Markets, wrote in a note Monday, markets during those occasions stood on shaky ground well before the Fed made its move. 

“While the next month may be choppy based on past action after initial cuts, over the next 3, 6 and 12 months the bulls win out,” Woods said.

“In fact, a year later the S&P 500 is higher 20 out of 20 times for an average gain of 13.9 percent.”

As for the upcoming immediate stretch of low uncertainty, Bank of America recommends rate-sensitive stocks.

The firm noted it’s overweight on financials, consumer discretionary, real estate, and utilities. 

Thoughts or feedback? Hit reply to this email or let me know on X @philrosenn.

Elsewhere:

📊 Beijing steps in for China’s property market. The People’s Bank of China unveiled its biggest package yet to support the beleaguered real estate sector, slashing outstanding mortgage rates and down payments for second homes. In total, policymakers cut borrowing costs on as much as $5.3 trillion of loans and purchase requirements. All this underscores Beijing’s urgency to stem its housing slowdown. (Bloomberg)

🏘️ The Fed does impact the housing market. After the central bank’s 50-basis-point cut, groups like Wells Fargo, Fannie Mae, and Moody’s all expect mortgage rates to come down and remove rate volatility. Lower rates, in theory, should improve housing affordability, which in turn should lead to more turnover in the re-sale market. (ResiClub)

Rapid-fire:

Last thing:

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