LiveWire

Markets are now pricing the US Federal Reserve to possibly hike one more time in May by 25pbs and then for interest rate cuts to begin as soon as July.

Mean reversion is a powerful force, especially with tightening financial conditions. * It's only a forecast. The research also looks at average hourly earnings coming down, together with ISM services prices paid (to revert back to 2019 levels).

While the US economy is finally seeing 'cracks' in its jobs picture, US Treasury yields continue to react downwards as traders forecast the weakening US economy will see lower interest rates. This downtrend in yields should act as support for valuations, particularly in technology names. On the earnings front in tech, Q1 earnings in 3 weeks should be decisive, but really the news flow continues to be encouraging. Should there be a more 'material' drop in markets, tech should be better able to withstand it. Investors should be eying to buy dips and look for Big Tech names that are still lagging but are showing encouraging signs (Google, Amazon). This post is written for an educational purpose of the Trading Game, and does not constitute financial advice.

The AAII US investor sentiment indicator is slightly bullish indicating investors are turning less risk averse amid the clearer path of avoiding a banking crisis. Overall sentiment remains depressed, a contrarian net-positive. It's also important to note that the recent rally appears to have low investor participation with many vocal bears (JPM, BofA, MS) left in the dust. Fundamentals continue to improve with the earnings picture getting better at the heavy cost of job cuts. Will it be enough to withstand a market pullback, remains to be seen. 

US PCE, the Fed's favorite measure of inflation came softer than expected, a positive for the US central bank as it relieves pressure to continue raising interest rates. Stocks reacted positively with the S&P 500 zooming 0.4% higher.