Discussion
Lots going on today and the market is whipping around pretty quickly. Some opening hour market thoughts from the “@TheWOTE_Private” account and follow-on commentary below.
Defensive sectors are outperforming, VVIX > VIX, and the UST curve is bear (long-end rising) AND bull steepening (short-end falling). Nasty combination with the market overvalued and positioning full.
But the most notable dynamic today is the move higher at the long-end of the TIPS break-evens curve. As discussed today in the John Williams post, “well-anchored” inflation expectations are KEY to the Fed sitting back and allowing the natural tightening process of YoY inflation falling while Fed Funds remains steady (resulting in a rising real FFR). Once those de-anchor the Fed will move in force.