First Word

Financial conditions tightened since early Feb on "hot" data, softer expected Feb inflation + jobs offsets and reinforced "data dependent" Fed not "data reactive"

This has been a rough few weeks for equity markets, with the S&P 500 falling 5% from recent highs. There are many skeptics who are now "top calling" saying the dominant bear trend is resuming. But as our clients know, this is not our take.

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The best way to see the FCIs, or financial conditions, is look at three metrics below -- VIX, 10-yr and USD.

  • all 3 have moved in an adverse direction since early Feb
  • Mark Newton believes the cycle is turning for yields (10Y) and if such plays out, this is support of stocks finding a bottom.
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SEASONAL INFLATION: Jan PCE likely "hot" following CPI and PPI, but Feb likely softer

We think Jan PCE deflator (inflation) coming out 2/24 will be "hot" but that is not surprising. After the CPI and PPI readings.

but as "tireless" Ken notes, head of data science research, at Fundstratinflation breakevens (...

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