Markets Breathe Easier as Inflation Fears Cool—But Don’t Tell the Hedge Funds
Price pressures ease as economic optimism creeps back—just in time for Wall Street to find another crisis to monetize.
### The Inflation Mirage
After months of hand-wringing, inflation expectations are finally thawing. No champagne corks popping yet—central bankers still have their 'vigilance' caps on—but the trend’s clear: the economy’s dodged a bullet (for now).
### The Bullish Contagion
From Main Street to crypto exchanges, the mood’s shifting. Bitcoin’s flirting with $70K again, and even goldbugs are quiet. Funny how 'transitory' starts sounding plausible when your 401(k) stops bleeding.
### The Catch
Remember: markets hate two things—inflation and the absence of inflation. Next week’s Fed meeting will either be a victory lap or a credibility massacre. Place your bets.
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NY Fed Survey Points to Recovering Sentiment
Corporate earnings and job sentiment are improving as well. The median one-year-ahead earnings growth expectation ROSE by 0.2% to 2.7% while the mean probability that the unemployment rate will be higher one year from now dropped by 3.3% to 40.8%.
With inflation expectations falling and economic sentiment improving, the outlook ahead appears far rosier than a few months ago. If lower inflation is sustained, the Fed has more reason to cut the federal funds rate, which could provide a boost to the stock market. The S&P 500 (SPX) has reflected this outcome and is up by 6.3% during the past month.
