Closing Thoughts for the Week

Investors got burned again hoping for the Fed to soften its stance. That being said, I don’t think the rally possibility from here is over yet. There are a lot of underlying signals saying that we’re kind of on the same trajectory as before. This could be the environment where emerging markets finally start to take the lead.

The FAAMG names may have just reversed the narrative. This feels, however, like it could be the blowoff in mega-cap tech that the sector needed. The breadth of the market is looking more like the melt-up scenario that I’ve been talking about, but the real catalyst here looks like it’s the bond market.

All of the world is still focused on inflation, but if you pay attention to some of the forward-looking indicators, it should be deflation that’s on the radar. 1-year forward-looking inflation swap rates are already down to about 3%. I can’t believe that the markets are getting caught up in the Fed pivot narrative again.