Powell landing meme pilot

If I were to recap markets so far in 2024, here is how I see it:

1) Early growth worries

2) Inflation worries take over as growth stays strong

3) A balance between the two

Markets are now walking a fine line. Inflation worries are fading and part of that is because growth is cooling. If growth cools to roughly a 2-3% real pace with inflation also running at 2%, then that's the perfect soft landing.

US equities hit a record today and have rallied in every day this month except for one. That's a sign of a market pricing in the perfect landing.

Inflation worries aren't dead though and could cause problems again. I don't think they will though and I think the problem instead will be growth. That's creeping in right now via the weak ISM services and retail sales numbers (and perhaps UMich if that's your thing).

I believe the market can tolerate slowing growth for a decent stretch from here: We're still in a bad-news-is-good-news regime but if weakness continues to creep in, we might have the market kicking and screaming for cuts in Q3 or Q4.

My main worry is that markets are already ahead of that and we're overshot, particularly in things like US tech. I wrote earlier this week about the latest Bank of America fund manager survey and some signs of crowding.

Others are worried about the latest round of meme stock rallies as a sign of euphoria but I would remind readers that stocks didn't peak until a full year after the prior GME/AMC mania. Still, sentiment is certainly worth keeping an eye on.

fear and greed