The markets got the news they wanted this week, which is that the disinflationary process continues on both the consumer and producer sides. The headline inflation rate in the U.S. is down to 3%, while the core rate is still much more elevated at 4.8%. Both readings came in below expectations, which was more than enough reason to give market bulls an opportunity to buy. Small-caps and tech stocks outperformed again, although utilities kept pace with the S&P 500. Perhaps more importantly, long-term Treasury yields came back down and resulted in a 2% gain.
Treasuries are still operating as a Fed proxy, so this move isn’t surprising, nor is the big rally in stocks. Most sectors posted weekly returns within ~1% of each other, so this current move is definitely broadening out. Tech is probably the favorite to maintain its position as a market leader here, but you have to like what you see from market breadth if you’re a bull.
