The markets continue to put inflation front and center. Despite what you hear about wage growth, consumers are falling further and further behind. The slowdown is real and it may be at the point now where it picks up steam. The inflation focus probably means that bonds are going to be screwed for a while. I’ll ring the deflation bell one more time.
It’s beginning to look increasingly like the U.S. economy should be able to avoid recession at least in the near-term. The bigger risk is likely to appear in 2023. That’s also likely cemented the idea that the Fed has the green light to continue raising aggressively to contain inflation. U.S. stock prices may have bottomed for now, but that doesn’t mean we’re out of the woods yet.
U.S. equities were up more than 6% on the week, but does that mean the good times are back? The VIX is also still on the higher side, although it has come down from its recent peak. I wonder how much of this week’s rally was a result of Fed-speak.
