The Pause That Refreshes Spooks Investors

The vertical momentum rally that started on October 27, 2023 seems to be losing some of its momentum. Maybe. That's OK with us. We would rather see our 5400 S&P 500 target achieved by yearend, then by mid-year. But as the Rolling Stones observed, "You can't always get what you want."

Slowing the pace of the advance this week have been hotter than expected CPI and PPI reports for February. That increases the likelihood that Fed rate cuts will be fewer and later than most investors expected at the start of the year. We've been in the no-rush-to-ease camp. We are still there and won't be surprised if the Fed doesn't cut this year at all. Previous rate cutting periods were triggered by financial crises and recessions (chart). Such a bad outcome isn't on our radar screen for this year.