The consensus narrative expects sustained growth would only encourage the Fed to hike more until the inevitable policy mistakes create a recession. But that narrative ignores the relatively high probability for the Fed to engineer a soft landing. Excess monetary accommodation is responsible for most
Markets are fairly quiet today and likely to remain that way until Thursday morning’s CPI report. Higher energy prices throughout January have markets braced for another uptick in headline and core CPI.
We recently shifted our yield curve focus from the 5/30-year spread to the 2/10 spread to account for rising concerns of a potential Fed policy mistake. A ‘policy mistake’ occurs when Fed rate hikes cause a recession.
Today’s data will lead to increased weekend reports of rising inflation expectations. But since January 3, inflation expectations as measured by 10-year breakeven yields have declined from ~2.65% to ~2.39% today.
Yesterday’s disappointing FB guidance arrived as the S&P 500 closed just beneath technical resistance near 4,600 and the CBOE Volatility Index (VIX) reached short-term support just above 20.
Covid-related economic disruptions should fade as we move deeper into the year, which may result in a fundamentally different macro environment than we’ve seen during other recoveries over the past 12+ years.
We continue to view the recent correction as bullish consolidation within an ongoing longer-term rally. However, the S&P 500 (SPX) will likely require a period of base building before it can moves through resistance of ~4,600. During that time, equity market volatility should have a
The rally from oversold has the S&P 500 (SPX) set up for a period of base building under the 4500-4600 breakdown area.
The focus was on MSFT/AAPL earnings and the Fed coming into the week. The two large Tech names reported solid Q4 results/better guidance, while the Fed’s neutral statement and hawkish press conference resulted in net-hawkish takeaways.
The ~11% correction in the SPX mostly matches the scale of recent past episodes when monetary accommodation was initially removed.
