Market Journal: Tactical Caution Confirmed
Market Journal: Tactical Caution Confirmed
Ignore green SPX/NDX. Cross-asset market price action outside of equities confirms today is important for the macro/equity market outlook.
Disclaimer: For informational purposes only.
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Discussion
A LOT has occurred today in cross-asset market land - unfortunately Fridays are a bit funky for me so I don’t have time to write at length (hopefully this weekend). But suffice to say: Today’s NFP report killed the prospects for a labor market-backed rate cutting cycle to begin in July or September. Janet Yellen continues to prop equities via TGA/RRP liquidity facilities, but cross-asset market price action outside of equities today confirms that tactical caution - even with Yellen’s liquidity floor in place - is warranted at least through next week’s June 12 CPI/SEP/Powell event day. Market thoughts provided via X DM throughout today below:
Three Things
Inflation is set to reaccelerate into the end of the year, as detailed by Warren Pies and ECRI.
The Fed communicated again today, through Timiraos, that they have an asymmetric reaction function regarding the dual mandate (market participants inappropriately believe the Fed will cut at the first sign of labor market weakness, regardless of inflation - not true).
The Fed communicated today through Roger Ferguson that they will hike in December if inflation is reaccelerating (assuming the labor market has not gone off a cliff by then).
