💰Don’t fight the Fed🥃

Equity markets continued losses for a second day as investors focused mainly on the prevailing economic data and interest rate hike cycle. Earlier gains swiftly evaporated even as the Initial Jobless Claims supported a softer labour market, 

Fed officials reminded traders that they are not done with the interest rate cycle, and the earlier upbeat mood could not lift sentiments. Investors will have to re-adjust their expectations and price in more rate hikes.

A re-calibration of expectations is needed, as most analysts agree. 

🎲The bond market is signalling recession looming again💸

Weakness in the stock market is also reflected in movement within the Treasury market. We are seeing a steeper yield curve; that is, the difference between the 2 and 10 years treasury yield is spreading widely., 

Indeed, the rise in short-term interest rates could be attributed to Uncle Powell. Multiple Fed officials commented that the current strong labour market would need a much higher terminal rate. This rate is known as the Fed Funds Rate, which is now projected to rest between 5% and 5.25%, an upward tick from 4.5% to 4.75% on the current anchor level. 

📮What are our dishes today? 📖

At 11 pm, we will have the Michigan 5-Year Inflation Expectations for Feb, which we expect to remain at 2.9%.

Concurrently, Michigan Consumer Expectation for Feb is likely to rise moderately to 62.9 from 62.7. 

Fed Waller is expected to speak at 1.30 am, and it could be yet another hammer on the market.