Closing Thoughts for the Week

While the headline inflation rate is expected to have come down again in August, the stickier core price increases, such as rents, services and healthcare, may not have peaked just yet. I doubt this changes the path of the Fed’s rate hiking policy, but it does appear that the cycle is being pulled forward a bit. The Treasury market continues to eternally frustrate me.

Friday’s jobs report delivered a mixed set of data that should encourage those hoping for more confirmation of a strong labor market. This is very unlikely to change the Fed’s thinking for the central bank’s September meeting. Stocks are again looking more risk-off here as the gains from the summer rally continue to disappear. I’m still waiting for Treasuries to get out of neutral.

If there’s anybody out there still holding out hope that the Fed pivot trade might still be in play, you might want to fold your hand now. The Treasury market, somewhat surprisingly, remained steady. I think this was traditional risk-off behavior returning to the markets even if for only a short time. It looks like conditions in the housing market are really getting ready to roll over here.