Closing Thoughts for the Week

We’re starting to see real evidence of labor weakness in the manufacturing space. The University of Michigan consumer sentiment report isn’t usually a market mover, but February’s report revealed some potentially important trends. There are signs here that investors are starting to prepare themselves for inflation and sentiment readings seem to confirm that. The markets should also be back on yen watch here.

The damage in the tech space seems much more selective than broad-based. The overall current tone seems to be viewing DeepSeek as an annoyance more than a threat. I still think there’s a risk that economic growth could slow quickly here as it has in the past when the bond yield curve normalizes. Treasuries and gold both had another strong week, which indicates that there is a defensive undertone in this market.

The markets may have been anticipating some more aggressive action on the tariff front. As a result, market volatility was relatively tepid and the major averages were able to tack on modest gains. Given that the BoJ both warned on inflation and signaled further potential rate hikes ahead, I think the pressure is going to be on the yen to strengthen as monetary conditions tighten. The buzz around DeepSeek could be the black swan for the markets.