Super Week Delivered. Nobody Blinked.
Five Central Banks Held, the Rotation Died, and Brent Hit $116
The Great Rotation is dead. Or at least it’s on life support. The Russell 2000 was up 8.9% year-to-date as of March 11. As I write this nine days later, it’s down 0.41% on the year. That’s a 9.3-percentage-point drawdown in less than two weeks. The S&P 500 is at roughly 6,583, down 3.49% year-to-date and sitting at four-month lows. Small caps, mid caps, micro caps—everything that was leading the market in early March has been destroyed by the combination of triple-digit Brent crude, a scorching PPI print, and a Fed that is now openly discussing a rate hike. The energy sector is the sole winner, up 34% year-to-date. Software, measured by IGV, is down 20%. The VIX spiked back to 26.5 after briefly dipping to 22.45 on Tuesday’s relief rally. The pattern this week was textbook: hope on Monday, reality on Wednesday.
Let me walk through the macro data because it was genuinely ugly. The February PPI, delayed by the government shutdown, finally dropped on March 18—the same day as the FOMC decision. Headline PPI came in at 0.7% month-over-month, more than double the 0.3% consensus. Year-over-year headline PPI hit 3.4%, a 13-month high. Core PPI was 0.5% month-over-month and 3.9% year-over-year, the hottest in 13 months and the fourth consecutive hot print. Pipeline prices, measured by Stage 1 intermediate demand, are running at 5.3% year-over-year, the worst since December 2022. This is not transitory. This is inflation re-accelerating in the parts of the supply chain that take months to filter through to consumers. Hours later, the Fed held at 3.50–3.75% in an 11-1 vote, with Miran dissenting for a cut. The dot plot still shows one cut in 2026, but seven of nineteen officials now see zero cuts, up from six in December. Powell raised the core PCE forecast to 2.7% from 2.5% and admitted the committee discussed a potential rate hike at the April meeting. He rejected the stagflation label, but then said the Fed is “in a difficult situation” with inflation progress “not as much as hoped.” That’s stagflation with a press-conference smile.
