Inside Markets

The major catalyst this week is Wednesday’s CPI print, which should provide more clarity for the Fed’s expected near-term policy path.

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.

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.

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.

The S&P 500 (SPX) has moved toward strong technical resistance in the mid-4100s. We expect this range will cap the rally in the near-term without a change in macro fundamentals.

The S&P 500 (SPX) is advancing toward technical resistance in the 4100s on strong growth sector leadership. The rotation into growth sectors and Tech in particular is following what looks like a peak in bond yields.

Calls for increased bank regulations fit the disinflation and recession narrative, driving the rotation into growth equity sectors.

There was no obvious catalyst for yesterday’s pullback other than the end of Washington hearings on recent bank failures without mention of expanded FDIC insurance.

FCNA’s acquisition of SIVB assets and deposits has helped near-term risk sentiment, but markets are still looking for additional policy measures from the Fed, FDIC and Treasury.

Recent equity market resilience has been driven by lower bond yields and rotation into growth sectors. Sidelined cash and value sectors have been a source of funds with mega-cap Tech as the primary beneficiary