Better than expected inflation numbers last week and dovish comments from Fed speakers pushed markets higher.

Despite the monthly PPI & CPI numbers coming in as expected or slightly lower than expected, year-over-year the numbers moved higher and there are still sticky elements to inflation, such as car insurance, transportation, and utilities. FOMC member Waller stated last week, "I don't think March can be ruled out for rate cut." And yet, futures on the Fed Funds Rate show June as the earliest expected rate cut at just over a 50:50 probability. Meanwhile, the Fed seems to be lessening liquidity via its reverse repo operations.
Meanwhile, equities are still over-valued and over-concentrated.

The top 5 stocks in the S&P 500 is equal to the market cap of the bottom 407 other holdings of the index. While this type of concentration has led to consecutive 20+ return years in the S&P 500, there is an 80% probability of at least a 10% correction when the market is as overvalued as it has become. In 2024, the S&P 500 did not trade below its relative 200-day Moving Average. In years when that happens, historically, the following year is more erratic in terms of returns. It's a shorter week on Wall Street so there is less economic data to digest, but plenty of speculation about the new administration in D.C. to keep investors guessing.
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