Closing Thoughts for the Week

It shouldn’t be surprising that the market started to buckle again when the FAAMG names failed to pull equities higher. It looks like the post-pandemic boom is officially over. I was surprised to see the lack of reaction to the Q1 GDP report. The familiar trend of stocks and bonds moving down together returned for at least another week, but I think the bull case for long-term Treasuries remains.

If you look closely, we might be seeing the very early stages of a normalization of the Treasury market. The rising rate narrative has pretty consistently resulted in a sell-off in U.S. government bonds over the past several months, but we didn’t really see that last week. We’re still seeing money moving into Treasuries, but it’s now being matched by corresponding outflows in equities.

There were three big economic numbers released last week that are likely to shape the direction of the economy over the next few months, if not longer. As long as oil and food prices are still going up, I don’t think we can make an effective argument that inflation is peaking. Lumber prices are rolling over here and I think we’re going to see that stick.