Weekly Signal & Noise Filter

The Sand Has Shifted

There is no need to recap what happened last week as countless volumes of digital ink has already been spilt to deal with that task.

Our purpose here is look beneath the hood of the price action, contextualize the causal drivers of prices, and draw meaningful inferences and conclusions to help shape our understanding of the information surface that is being presented to us by the data.

From a top-down macro approach, the sand has shifted and the cycle has entered a new stage. 

The growth slowdown that was hypothesized in the September, and put into doubt in October, has without question arrived.

The first implication of this is that the Fed hiking cycle is dead in its tracks and is hanging by a thread on life support.

• To resuscitate the hiking cycle, we would need two hot back-to-back core-PCE readings and possibly the addition of another two strong NFP reports. 

• Meeting these conditions is a low probability event at this point.

The question now is, when does the easing cycle begin?  The easing will likely start when we have more evidence of the following: