Let’s not dwell on what happened yesterday, as all sorts of oddities tend to occur at month’s end.
The critical question for everyone in global capital markets is what the FOMC will signal about further hikes this year.
Since the FOMC last met in December, incoming data on wage growth and inflation have been encouraging, while signals on activity growth have been mixed and, at times, concerning, which has likely made the committee’s decision to downshift to 25 bp much easier.
The FOMC goal is to stay slightly below the potential growth path and hopefully rebalance the labour market so that inflation will return and hold the trend.
Still, despite a more amenable FED, folks remain skeptical about stocks this year in most corners of the US capital markets.
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Contrary to that view, the soft-landing crew point to the integral ballasts for risk-taking lately, which has been the return of the China engine, with US inflation relief very much in the driving seat.
China’s reopening has undoubtedly been at the forefront of investor focus, given its consequential impact on global growth and asset prices domestically and outside China.
Oil remains supported by OPEC toeing the production line, and the key three engines, China, the US and Europe, are firing on more cylinders than not. Suggesting global recession is still more risk than reality at this point.
