Macro Inflation data shows that prices are on a steady decline path, supporting the Fed’s easing case. Both PCE and PCE deflator are now almost reaching the level seen before the pandemic. On the other hand, strong spending and stable GDP growth point to a soft landing. These two effects combined created a Goldilocks scenario for risk assets. Since the FED acknowledged its accomplishment of cooling down inflation in the…

Macro A year ago, economists concluded that getting inflation under control would require a spike in unemployment and a recession. During the year, inflation has come down faster than the event in the most optimistic forecast, while the economy maintained a robust growth number.US growth was promoted by fiscal stimulus, which positively impacted consumer spending but also had substantial organic growth through increases in productivity and continuous innovation. Some economists…

Macro The FED has a chair with a very dovish message, and the committee members are walking it back. But even with J. Powell’s dovish tone, markets have been already well ahead of the FED. Bonds have rallied, and financial conditions have eased, which could create more inflationary pressure. The concern is that the market is starting to price in rate cuts earlier and earlier, and the more the market…

Macro This week, Jay Powell has surprised everyone and gave a festive giveaway to global markets. For the first time, he confirmed the assessment that the inflation is easing and going in the right direction. The meeting was mostly centred on the Summary of Economic Projections (SEP, also known as “the dot plot”), which changed the median 2024 FED funds projection from 5.1% to 4.6%. This translates to a median…

Macro Analysis of markets has been challenging as the economic models lost a large portion of their economic power due to the amount of fiscal and monetary stimulus. In addition, till October, we had ‘bear steepening’, which is very rare with few past instances and a patchy precedence for what follows. The consumer is slowing but not stopping, with robust demand data and an overall positive economic outlook. Nevertheless, the…

Macro … Pending … Rates End of the hiking cycle. The narrative has shifted away from higher for longer, and the market is rapidly recalibrating yields. The expectation is that rate cuts will start early next year, with FED funds futures now pricing a 60% chance of a 25 bps cut in March. It is also possible that the FED will start cutting later in the year but cut more…