Utilities are joining Treasuries and gold in confirming that short-term conditions actually look more risk-off than risk-on. A lot of the data is suggesting that inflation might be heading higher before it heads lower again. The markets remain unimpressed by the Bank of Japan’s lack of action and the struggles of the yen exemplify that.

Utilities are still holding up relatively well here despite the Fed’s implicit acknowledgment that it’s likely to allow inflation to remain above target. The initial market reaction to last week’s BoJ meeting was a negative one and we now need to find out if the dovishness by both the BoJ and the Fed is a silent signal that something is wrong under the surface.

The cyclical reflation trade seems to be picking up strength here, but utilities aren’t giving up. Small-caps are still in the process of making slow progress and getting pulled higher by cyclicals. Lots of central bank activity this week led by the Bank of Japan’s interest rate decision on Monday. We’re going to see two competing forces on the dollar this week.