Two Sets of Conflicting Data Points: Market Commentary from Cabana’s CEO – April 29, 2024 

6 months ago

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Last week we saw two sets of conflicting data points. Earnings are coming in above expectations, which is good, and inflation is also coming in above expectations, which is bad. The Fed’s preferred PCE report hit the wire Friday morning and showed a rise of 2.8% year over year. The expectation was 2.7%. Month over month the rise was 0.3%. Through the first three months of the year, inflation rose at a rate of 4.4%. Friday’s data follows the quarterly data we got yesterday, which also revealed a slowdown in GDP.  

So, all in all we have persistent inflation and a slowing economy. This brings to mind the term “stagflation”, whereby inflation persists in the face of negative economic growth and is a worst case scenario. On the other hand, we could be seeing a lag here and inflation will begin to drop as the economy cools. Job reports in the coming weeks will shed some light on this. I have heard lots of experts take opposing sides of this, so nobody really knows. What I do know is that we are in the midst of the largest equity and bond correction since last September. Bond yields have now broken through previous resistance levels and the 10-year Treasury could very well test the 5% mark hit last year. What I also think I know is that the Fed is not going to be cutting rates anytime soon. As such, we expect volatility to continue as we head into summer.  

I am glad we have a process to follow, and we are doing just that. Last week we reallocated our portfolios consistent with the fundamental and technical price data we receive. 

At Cabana, we are currently in our Cautiously Bullish Scene, but the market is day by day.  

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January 17, 2024

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