The Fed: "Tighter for Longer"

Discussion

In my framework, a key sentiment “tell” is when market participants who have been on the correct side of a move begin to dismiss data contra to their thesis (mind you, this “tell” applies most powerfully to MYSELF. We all know when it’s time to fade yourself, it’s just very difficult to execute). Back in late 2021, as the major reflation trade that had been in place since mid-2020 was coming to an end as the Fed pivoted aggressively into EOY, the leading reflation bull on the “Street”, Marko Kolanovic, began to explain away the Fed’s hawkish pivot in order to defend his longstanding reflation thesis. I was already in the process of pivoting my thesis and positioning, but his dismissal of the Fed in a December conference call with JPM clients was a key solidifier that I was on the right track. Yesterday I received a similar “tell” from a heretofore soft landing equity bull, and then again this morning from a key FED source.