Closing Thoughts for the Week

The FAAMG names may have just reversed the narrative. This feels, however, like it could be the blowoff in mega-cap tech that the sector needed. The breadth of the market is looking more like the melt-up scenario that I’ve been talking about, but the real catalyst here looks like it’s the bond market.

All of the world is still focused on inflation, but if you pay attention to some of the forward-looking indicators, it should be deflation that’s on the radar. 1-year forward-looking inflation swap rates are already down to about 3%. I can’t believe that the markets are getting caught up in the Fed pivot narrative again.

We have yet to see a capitulation and probably need that to happen before we see a firm bottom in place. I think Treasury yields are higher than they should be given macro conditions and represent some intriguing value once we get on the other side of this thing. I’m not sure the jobs, inflation and retail sales reports we’ve seen over the past week or so really change the market narrative much.