The latest inflation data is looking way too sticky and the optimism for a cut next month is basically evaporating. Equities are feeling the pressure though it’s weird that Treasury yields are staying stable.
Honestly, the “soft landing” narrative feels shaky again. As an international investor, this constant flip-flopping on the Fed’s path makes me want to just sit on cash rather than chase this volatility.
Totally agree. Powell is terrified of becoming Arthur Burns (the Fed chair who cut too early in the 70s and caused a massive inflation spike). With the core numbers sticking, he has zero incentive to cut in December. He’d rather hold rates too high and cause a mild recession than cut too early and destroy the Fed’s credibility.
The equity market was delusional while the bond market was right all along.
That ‘stable treasury yield’ you mentioned is the smoking gun that bond traders stopped pricing in aggressive cuts weeks ago.
Stocks are just finally waking up to the reality of ‘higher for longer.’
Cash is definitely king until the S&P corrects to reflect the real cost of capital.