Equities and bonds dropped last week as inflation moved higher and uncertainty about tariffs, et. al. hit markets.
Small Cap stocks and Healthcare took it on the chin over the possibility of regulations in the food and drug industry under a new administration. While Retail Sales were up more than expected in October (+0.4% vs +0.3%), if food and autos were backed out, the number would have been closer to -0.1%. Inflation, while it came in as expected (+0.2% for both PPI & CPI), the year-over-year number revealed that producer prices inched higher and close to equaling or exceeding consumer prices, which is not a good sign for lower inflation moving forward. Fed funds futures dropped last week from an 85% probability to just a 58% probability of a rate cut in December.
Meanwhile, the 10-year Treasury Yield is rising despite 75 basis points worth of Fed rate cuts.
The yield curve continues to steepen as the 10-year Treasury Yield is approaching the 3mth T-bill yield. CEOs, as a whole, do not seem confident as more chief executives are sellers of the stock of their respective companies. And yet, investor sentiment is at all-time-highs. The Euphoriameter is at a peak higher than 2000 and the National Association of Active Investment Managers shows equity exposure at 4-month highs. There are plenty of Fed speakers this week to muddy the waters.
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