Fed Pivot Signals Softer Landing, But Volatility Persists
OVERVIEW Markets are pricing in Fed rate cuts by mid-2024 as inflation cools and labor data softens. Equity valuations have expanded on this thesis, but corporate earnings—still under pressure from margin compression—remain the critical variable. The S&P 500's resilience masks divergence: mega-cap tech is doing heavy lifting while mid-cap and small-cap remain fragile. KEY SIGNALS PCE inflation trending toward 2.5%, down from peaks. Jobs reports showing decelerating wage growth and rising unemployment. Treasury yields compressing (10-year under 4%) on rate-cut expectations. Credit spreads widening modestly—not panic, but caution. WHAT TO WATCH Q4 earnings season (Jan-Feb) will validate or crack this rally; misses could trigger 5-8% pullback. Watch for Fed messaging shifts in January—any hawkish surprise reverses the current momentum. Position sizing matters: consider de-risking in tech winners that have already priced perfection.
This is a members-only intelligence brief from Yesodi. Join to read the full analysis, discuss with community members, and access all briefs.
Join Yesodi →