Asian markets are showing a mixed bag this Monday. Hong Kong’s Hang Seng is up 1.3%, fueled by Alibaba’s reported demand for its Qwen AI app (earnings due Tuesday, so let's see if that holds). Australia’s S&P/ASX 200 gained 1.1%. South Korea's Kospi is up as well. But Shanghai's Composite Index dipped 0.3%. It's choppy, to say the least.
U.S. futures are up – S&P 500 futures rose 0.6%, and Dow Jones Industrial Average futures are up 0.3%. The U.S. markets are heading into Thanksgiving week, so expect lighter trading volumes and an over-emphasis on any scrap of consumer spending data.
The Data Desert
Here’s where things get interesting – or, more accurately, aren't interesting. The article mentions a "6-week U.S. government shutdown" that left investors "struggling to parse trends in the economy." That's putting it mildly. A six-week data vacuum is a black hole for any kind of meaningful analysis. As SPI Asset Management noted, "In a data desert, even a puddle looks like a lake."
What kind of informed decisions can you make when the baseline data is potentially six weeks out of date? It's like navigating by dead reckoning – you might eventually get to your destination, but the risk of being wildly off course is significantly higher. This makes the market's reaction to even minor data points (like holiday foot traffic) disproportionately amplified. Are we looking at genuine trends, or just statistical noise magnified by the absence of real information?
This raises a critical question: how much of the recent market volatility (the "sharpest hour-to-hour swings since a sell-off in April") is attributable to this data drought? It's hard to put a precise number on it, but I'd wager it's a significant factor. And this is the part of the report that I find genuinely puzzling: Why aren't more analysts calling out the inherent uncertainty introduced by this prolonged lack of data?
The Fed's Mixed Signals
The article then pivots to the Fed and interest rate cuts. The president of the Federal Reserve Bank of New York, John Williams, sees "room for a further adjustment" to interest rates. But "other Fed officials have argued against a December cut, saying inflation is still too high." This is the classic Fed two-step: one foot forward, one foot back.
Traders are betting on a nearly 72% probability of a December cut, up sharply from 39% a day before. That's a massive swing in sentiment based on…what, exactly? A single speech from one Fed official? It feels like the market is grasping at straws, desperately seeking a narrative that justifies its continued upward trajectory.
Here’s a thought leap: How reliable are these probability estimates from CME Group? Are they accurately reflecting the underlying economic reality, or are they simply reflecting the collective hopes and fears of traders who are themselves operating in a data-deprived environment? It's a question worth asking, especially when the stakes are this high.
The bond market seems to agree, with the yield on the 10-year Treasury easing to 4.06% from 4.10% late Thursday. But again, is this a rational response to economic fundamentals, or is it just a knee-jerk reaction to the possibility of lower interest rates?
Bitcoin, that perennial bellwether of speculative excess, is up 3.2% at $87,350. On Friday, it briefly plunged below $81,000 before pulling back. That’s down from nearly $125,000 last month and brought it back to where it was in April. What does this tell us? Bitcoin's volatility seems disconnected from traditional economic indicators, making it a risky bet. As reported earlier this week, Asian shares mostly gain and US futures also advance after Wall St ends with gains.
Absence of Evidence Is Not Evidence of Absence
The biggest takeaway from this report isn't what it says, but what it doesn't say. It's the elephant in the room: the lack of reliable data. The market is trying to make sense of a complex economic landscape with a significant portion of the map missing. And that, in my opinion, makes any conclusions drawn from this data inherently suspect.