The market is optimistic today on the combination of:
- Slower growth convincing some the Fed will go easy
- The Nasdaq at support and FB posting good earnings
- The classic BTFD mentality
- Stability in yields
- Perhaps some month-end flows
I don’t know if any of that is a foundation for a sustained rally but sustained rallies are built on optimism. What I do know is that tomorrow the March US PCE report is out that will offer another read on inflation. One reason that Q1 real GDP was low as that inflation was surprisingly high. Another high reading in tomorrow’s report will put the focus back on prices and the possibility of fast Fed hikes beyond neutral.