Investors came to grips last week with the likelihood that future rate cuts may be delayed.

Last Friday's Jobs Report was higher for December (+256,000 jobs), which was better than expected. This caused futures on the next rate cut by the Fed to drop, with the expectation of a June cut the closest to a 50:50 prospect. Some forecasts are calling for the Fed's rate cutting cycle to be officially over. However, the underlying factors within the Labor Market point to potential trouble. Both "Job Quits" and "Job Hirings" in the JOLTs data released last week show a decline, meaning a potentially stagnant job market.
Meanwhile, though the Fed cut 3 times last year for a total of 100 basis points, interest rates have not proceeded lower - they have increased.

Since the first rate cut in December of last year, the yield on the 10yr Treasury is up more than 100 basis points. The average rate on a 30-year mortgage (as of this morning) is over 7% and closing in on the high in May of last year. As equities struggle with valuations and higher interest rates, diversification is the best investment strategy moving forward. This week's inflation data and Fed comments will determine how volatile trading will be this week.
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