Weekly Risk Signals

Last week’s rare feat for the markets could mark the early stages of a return to traditional risk-on/risk-off behavior, but it’s still too early to tell. Where we head here depends on what the market thinks about the Fed and inflation. We are truly living in a once-in-a-lifetime market environment.

A reversal of short-term over-bearish conditions that have built up over the past month highlighted the markets last week. The rally in Treasuries and the pullback in the dollar suggest that peak inflation and interest rate concerns may be fully priced in. Short-term conditions look at least a little more favorable here, but the long-term picture is still very clouded.

I’m really beginning to think that it’s time to get more bullish in the short-term. Subjectively, I haven’t seen the markets this encompassed by fear and pessimism in a long time. Any sliver of good news could be the catalyst that sends the markets rallying again. I really think there’s melt-up potential here and there’s more upside than downside in the near-term.