Inflation was again the dominant theme last week, both on the consumer and producer side, but it was the market’s reaction to those figures that was interesting. If Powell decides to cut while inflation is still creeping higher, it’s entirely possible that reflation becomes the dominant theme as we move further through 2024. Treasuries could have some headwinds as we move into spring.

Last week provided a little bit of everything for investors. The yen carry trade may finally be losing its luster. The biggest story, in my opinion, within the financial markets themselves are the major advances in gold, utilities and Treasuries. I wouldn’t call the labor market vulnerable yet, but it’s another one of these slow burns where we’re seeing the data trending in the wrong direction.

Last week seemed to encapsulate quite well the state of the markets and the economy right - the general sense that at a high level everything is just fine, yet the data reveal vulnerabilities under the surface. The markets didn’t really do anything last week to dispel the notion that the bulls are in charge, but it’s still not a high conviction market. Small-caps are stabilizing relative to large-caps, which is a positive sign for market breadth.