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  • Christian Armbruester

Running Bulls

To put it into technical terms: the markets went a bit nuts last week. The S&P broke 4500, 10-year Treasury yields are safely back below 4%, and the mighty US$ took a pummeling with the DXY index closing below 100 for the first time in more than a year. Even oil pushed through heavy resistance to trade above 75. What caused all of this invigorating bullish sentiment? The US economy is cooling.

CPI, PPI, and the jobs report all came in better or as expected, and interest rates may finally stop going higher. Even better, the ensuing recession looks to be a soft one, with most analysts expecting substantial growth from 2024 onwards to justify current valuations. Technically, the markets look poised to go higher. What could possibly go wrong?

Someone on Twitter once advised me that the Fed will do whatever it takes not to look stupid. Clearly, they got that wrong when it was transient, so there is also no way they stop bringing the hurt, at least until inflation is resolutely out of the system. They even said as much, and the preference is still for something to break before they begin to think about easing. The markets may very well demand their pound of flesh long before interest rates actually go lower.


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