Closing Thoughts for the Week

Last week was a rare one for the financial markets - one that could potentially mark a significant shift. Inflation (and the Fed’s response to it) has been the key driver of the bond market decline. The latest piece of inflation data hit just this past week - the Fed’s closely watched PCE price index.

Last week’s call for a short-term melt-up rally turned out to be prophetic. Whether it can extend further could depend on what we see in the data this coming week. The consumer is getting weaker and that will sap the demand for energy heading into the second half of the year.

This week was all about the central banks and they did not disappoint! There’s so much pessimism in the markets right now that it’s getting harder to think that this might not be a “buy when there’s blood in the streets” kind of moment. With sentiment this negative, I think it’s more likely that the next big move is to the upside, not the downside. We just need a single catalyst to put things into motion.