- Last week’s downside surprise in headline CPI was met with mixed reactions from market participants, but ultimately fell in line with my expectations. The data point boosted probabilities of a rate cut sooner than later. Additionally, a second cut in 2024 is now more likely.
- Unsurprisingly, market participants felt comfortable moving up the risk curve by repositioning out of the magnificent seven into a bevy of small caps (as demonstrated by the price action of the IWM).
- This week should see follow through as the case for an impending recession remains dubious at best. FOMC members will likely be careful yet deliberate in their attempts to display more willingness to accommodate markets and the economy.
- Economic data released this week will be overshadowed by market movements, particularly a continued fall in the DXY and Treasury yields which should help bolster long-duration equities and other risk assets.