Market Update - Egg Face

In this current environment, price targets age about as well as leftover milk. If there were a chart metric for panic locking, the benchmark would be the BPM of LO’s and real estate agents watching rates forge higher. Meanwhile, the 10yr might as well be correlated to a herd of cats with a garden hose. Forget fundamentals, the only thing the market cares about right now is the belief or disbelief in the word “transitory.”

The timing of all this is all but impeccable (cue sarcastic eyeroll)…. In less than a week, the FOMC committee will cast their votes on future fed policy (cuts/hikes). Meanwhile, Powell will take center stage and undoubtedly field questions about how oil prices may impact forward guidance….Keep in mind, it’s not the actual verdict that markets will latch onto, it is the word choice, tone, and emphasis he uses while interpreting recent events… For anyone wondering, there is a 4 percent chance according to Polymarket that he uses the word “egg.”

Putting the recent geopolitical events aside for a moment, one cannot help but wonder how this meeting might have gone without the market impact of the war. In the past month we received a meaningful drop in payrolls, improvement in Treasury inflows, and just yesterday, CPI showed the most encouraging signals since 2021, especially given the seasonality when prices normally rise. This would have been a strong signal for bonds to improve if there were not a significant market derailment underway.

Alas, we have been handed a wild card. The question is: are we destined to be handed another Old Maid card (which would mean bad timing for Spring market buying again), or will we draw a surprise ace on the river (which beats a straight… or more appropriately a “Strait”)?

I think it goes without saying that the only certainty we can rely on is the likelihood of more uncertainty. In times like these, pipeline defense is prudent and reprices can happen in very short order. The market is still searching for a floor sturdy enough to stand on. So, while our brains may be scrambled, and outlook runny, we’re all just doing our best not to wind up with egg on our face.