Macro Based on all upcoming macro data, the FED is highly unlikely to cut rates as much as the market expects. CPI and PCE reported this week that they are falling but above expectations. Most of the resilience in inflation comes from the services sector, which is mostly a post-COVID catch-up. The overall mosaic of the data emboldens the FED’s patient stance. It is unlikely that there will be a…

Macro There are worries that “the last mile will be the hardest” in the inflation battle and that, historically, inflation spikes are coming in wavers. We have to be cognizant of the inflation acceleration risks, but the fear that inflation will spike again significantly might be overblown. Except for the “unknown unknowns”, such as unforeseen supply shocks and pressure from new geopolitical developments, there are no apparent drivers to the…

Macro Blockbuster US Jobs Report gives a surprisingly strong start to 2024, showing that the labour market remains remarkably resilient. The payroll report nearly doubled economists’ forecast (185k), adding 353k jobs in January, and significantly revised December’s number from 216k to 333k. Hourly earnings jumped 0.6% in January (faster than December and November gains of 0.4%) for a 4.5% TTM. Although a weaker labour market is not a prerequisite for…

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…