Based on the observation that labour shortages were easing, productivity was rising, and excess savings were diminishing, I argued last month that the path to lower inflation was on course. Yet the Fed officials were still shouting that they would continue to tighten the screws more than they already had, and longer than originally forecast. Markets are questioning if such actions would become necessary. The forex, bond and stock markets said no way. Since my last letter, dated March 3, the DXY fell 3.71 points to 101.96, the 10-year Treasury yield decreased 76 bps to 3.30%, crude prices rose $14 to $80.50 and credit spreads hardly budged – an indication of financial stability. When all is said and done, the S&P 500 rose 209 points to 4105. The latter might go even higher, if it were to cross 4200. Up until now, traders have not been willing to push stocks out of its 3800 to 4200 range for months.
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By Hubert Marleau
By Hubert Marleau