In the March 15th Market Commentary, a 4.50% 10-year treasury note and 4700/4800 downside targets for the S&P500 were flagged as risk targets.
To be clear, these were not base expectations or forecasts, but rather risks to be mindful of in the event the disinflation narrative was questioned and replaced by a reflation narrative due to hotter inflation prints.
The 10-year treasury note blasted through these levels two weeks ago, and the 4900-handle was reached last week in the cash-market.
In addition to approaching or surpassing these risk points, the sector rotation that was highlighted in the April 1st note has arrived. The NASDAQ is now underperforming the S&P500 YTD.
In Pinebrook’s view, the driver of price action will be developments in the (dis)inflation narrative. To monetize the price action, the (dis)inflation narrative must be front run.
We start with the proposition that the Fed has a composition problem with inflation measures, not a reacceleration in general prices problem.