July Market Leverage and Energy Pricing ?3

22:51 21-Aug-25


Market leverage through July 2025Market leverage edged unsustainably higher in July, though it has not yet exceeded two prior peaks.  What is also rare enough to deserve mention is the significant (almost 3%) reduction in overall cash credit balances for the first time in almost a year while margin credit still rose slightly.  This is yet another reason to worry about the job market and the effect of the associated zombie capital in retirement accounts on stock indexes.  In prior press conferences, Powell has said that further employment weakness would be unwelcome, and I expect that will outweigh inflation concerns.  FedWatch chances of a September quarter point cut have continued to decline another 5% from the level cited Thursday morning, to 75%.

American natural gas vs electricity pricing through July 2025July prices for American natural gas declined while those for electricity remained steady, if one chooses to keep believing BLS figures.  I see no particular reason to doubt these with damage already having been done in the first half.

This service has long maintained that stagflation is the best possible outcome for the American economy and that the Fed has no good options in the face of that.  Powell will speak in a matter of hours, and I continue to think he will concede at least the possibility of a September rate cut, which should be market moving.  Either way, though, his words are unlikely to the last on the subject.