Inside Markets — Dovish Takeaways
Dovish Takeaways
May 2, 2024
The more dovish paraphrased takeaways from yesterday’s Fed policy statement: 1) committee finds little signal from the Q1 inflation uptick due to lagged effects embedded in the data; 2) see consistent progress on wage growth; 3) see no signs of reheating with inflation expectations remaining anchored; 4) a decline in housing and further healing in supply conditions should deliver further disinflation; 5) a forecast for sequential inflation to move lower throughout the year. It’s an equity-friendly message, but markets will be more influenced by near-term data that include tomorrow’s Jobs Report and May 15 April CPI print.
Consensus is looking for nonfarm payrolls to increase by ~233,000, down from +303,000 last month (watch for revisions) and an unchanged Unemployment Rate of 3.8%. Average hourly earnings are expected to rise +0.3% MoM to a YoY rate of 4.0%, down from 4.1% in March.
We’re tactically bearish on the SPX until it breaks above the 50-day average, now 5129. The benign macro conditions that compressed volatility and expanded forward multiples from November-March are now being challenged. Growth conditions remain relatively resilient, but the promise of Fed rate cuts has been pushed out, and the disinflation trend ended during Q1. However, the current inflation narrative may have overshot reality with an inline April Jobs Report (tomorrow) and inline April CPI print (5/15) likely to result in a successful test at ~5129.
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