Inside Markets — Bearish Sentiment
Light equity positioning and elevated bearish sentiment have been major supports for equity markets in the recent past.
Inside Markets — Developing Bullish Trend
The recent backup in bond yields looks like normal consolidation in a developing bullish trend. The term ‘bullish trend’ refers to bond prices, meaning we expect lower yields in the months ahead.
Inside Markets — SPX Cap
We’ve been saying for several weeks that strong technical resistance in the mid-4100s should cap the S&P 500 (SPX) until there’s a change in macro fundamentals. Bull markets lead a cyclical recovery, but a cyclical recovery isn’t possible when all segments of the yield curve
Inside Markets — Disinflation
The ISM new orders/inventory ratio has been signaling accelerated PPI disinflation for the last several months. Producer prices tend to lead consumer prices by a similar amount of time, and the widening spread between CPI and PPI is also a sign of accelerating disinflation.
Inside Markets — Market Expectations
The debate over a 25bp May rate hike is less important than the disconnect between Fed rhetoric and market expectations for back-half rate cuts. Fed officials continue to endorse a hike and hold policy into year-end, while markets remain priced for nearly 50bp of rate
Inside Markets — CPI report
It’s a relatively quiet session as market participants wait for directional clues in tomorrow’s CPI report and Fed meeting minutes.
Inside Markets — Catalyst
The major catalyst this week is Wednesday’s CPI print, which should provide more clarity for the Fed’s expected near-term policy path.
Inside Markets — Disinflationary Cycle
An expected collapse in bank credit creation should accelerate the disinflationary cycle. Every bank wants to exit Q1 with more cash on hand than they reported at the end of Q4.
Inside Markets — Reset
Bond prices and equity prices have been positively correlated for the last 14 months. Over the long run, these two asset classes have a negative correlation with higher bond prices and lower yields reflecting increased risk of slowdown in economic growth.
Inside Markets — Resistance
The S&P 500 (SPX) has moved into a strong technical resistance range between 4050-4200 with a challenging fundamental backdrop. Breaking above ~4200 likely requires a change in macro fundamentals, specifically a Fed pivot.