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MARKETS

The S&P 500 closed higher, fueled by a softer-than-expected inflation print, giving traders the green light to ease back into beaten-down tech stocks and sending the Nasdaq soaring 1%. The immediate read-through? The takeaway? The stagflation narrative hanging over markets just got watered down, restoring some degree of breathing room for the Fed—a stark contrast to the alternative scenario where a hotter CPI would have slammed risk sentiment and forced another leg lower.

But let’s be clear—this isn’t a free pass to rally unchallenged. The real question now is how far Trump is willing to push on tariffs and government cuts. The idea that he’s deliberately trying to engineer a recession seems like a stretch. Still, with April 2’s reciprocal tariff D-Day looming, traders would be foolish to dismiss his resolve to re-write global trade. If the past few weeks have proven anything, his tolerance for the “pain trade”( US stocks lower) is far higher than the market assumed.

Trump isn’t just flirting with protectionism—he’s fully wielding tariffs as a battering ram to force a global economic reset. He’s not backing down anytime soon, which means more volatility ahead as markets adjust to this new reality.

As we flagged on Monday, this market is an absolute minefield—even good data comes with tariff strings and a DOGE-sized asterisk.

Yes, **inflation cooled—**for now. February’s CPI print showed little change from January, signalling that price pressures didn’t accelerate in Trump’s first full month back in the office. On the surface, that’s a win for markets hoping for a Fed pivot.

But here’s the catch: those tariffs.

The CPI data doesn’t yet reflect Trump’s latest tariff barrage, which just landed this month. That means today’s relatively tame inflation print might be nothing more than a temporary mirage. If tariffs start filtering through to consumer prices, the inflation battle could quickly get messy again, forcing the Fed to stay in higher-for-longer mode longer than markets expect.

So, while rate cut hopes got a little oxygen today, traders should tread carefully—this market is still navigating a policy minefield.

For those banking on a "Trump put" at these levels, that might be wishful thinking. Sure, CTA liquidations and systematic selling flows appear to be losing steam, and momentum traders are cautiously stepping back in, but restoring full-scale bullish conviction? That’s still a long way off. At this point, the only genuine market lifeline is a decisive pivot from the Fed—until Powell explicitly opens the door to near-term cuts, this rally is more of a relief bounce than a breakout.

The macro chessboard is shifting, and all signs point to further Fed easing—but not without its fair share of curveballs. Consumer demand is losing steam, confidence across businesses and households is deteriorating, equity markets have pulled back from their highs, and GDP forecasts are now running below trend. By all accounts, that’s a textbook setup for rate cuts.

But here’s the catch—inflation is still running closer to 3% than 2%, and Trump’s tariff war is only in its opening innings. The Fed doesn’t need a reminder of what happens when it misreads inflation risks. The last time Powell’s team went too dovish, long-dated Treasuries sold off violently, sending yields rocketing over 100 basis points in short order.

So while the case for monetary easing is building, the Fed is walking a tightrope. Move too fast, and they risk another bond market revolt, where higher long-end yields neutralize the very easing they’re trying to deliver. But stay too cautious, and markets will force their hand with an equity and credit unwind that could get ugly fast.

This is where policy miscalculation meets market reflexivity, and if the Fed gets caught flat-footed, brace for a volatility explosion. Powell and Co. might be aiming for a soft landing, but the market is still holding the eject button.

Bottom line? Volatility isn't done, tariff risk is still front and center, and this market remains a trader’s playground, not an investor’s paradise—so pick your spots wisely.

THE VIEW

The relentless drumbeat of geopolitical, trade, and fiscal policy noise has cranked up market anxiety to full volume. The silver lining? So far, actual policy implementation has been far tamer than the extreme campaign rhetoric. But that hasn’t stopped the market from latching onto soft survey data and running full speed with the recession narrative.

Despite all the doom and gloom, I firmly believe the Fed will pull the rate-cut trigger sooner rather than later, and this latest inflation print just cracked that door open even wider. But in a trader’s market, the real tell isn’t in the headlines—it’s in the price action. The key question now is: how fast does this rally get sold? That will reveal two critical things:

1. Is forced selling drying up? If the relentless downside momentum is fading, it signals a potential shift in sentiment.

2. Are short sellers starting to blink? If bearish conviction is wavering, expect a wave of unwinding that could fuel an even sharper short squeeze.

And let’s be real—we haven’t seen the doom-and-gloom recession fears bleed materially into the “hard” economic data yet. Consumer spending, capital expenditures, and corporate earnings aren’t flashing red. But that hasn’t stopped every headline-chasing hot take from painting a Trump-induced recession as an inevitability. Until the real data cracks, I’d be cautious buying into the panic.

That said, don’t lose sight of the bigger picture. Geopolitics—particularly peace in Ukraine—far outweighs any short-term market noise. While traders obsess over U.S. tariffs, EU fiscal shifts, and China’s economic wobbles, the reality is that global stability hangs in the balance.

For all the market hand-wringing over inflation prints, rate cuts, and growth projections, none of it holds a candle to the significance of securing long-term geopolitical stability. If diplomacy succeeds and we see genuine de-escalation in Ukraine, it would be a game-changer for global risk sentiment. That’s a far bigger catalyst than whatever the Fed, ECB, or PBoC does in the next six months.

Markets can recover from recessions, but repairing geopolitical fractures takes decades. And that’s something we all should remember, no matter how deep the next rate cut debate goes.

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