Growth Over Inflation

S&P 500 post FOMC continued as per the premium call „the rally will go on this week thanks to liquidity, and won‘t offer deep dips“ – the market breadth was good, ad key sectors (XLF and XLY) leading were accompanied to a sufficient degree by tech.

While the immediate post FOMC conclusion was that of dovish Fed, the array of other central banks (notably SNB, and continuing of course with PBOC) proves there is willingness to err on the side of economic growth support vs. inflation that I had been vocal lately about bottoming out too high. Liquidity is still positive, and neither the yesterday discussed slowdown in Fed balance sheet runoff can be ignored.

This makes for a stagflationary environment a couple of quarters down the road, but for now we‘re still in waning disinflation, earnings growth (hello, FedEx) and wage growth (forget not that job market support mentions are what ignited the risk-on run during Powell‘s conference), and that‘s positive for equities, commodities and precious metals (LEIs aren‘t as negative as they used to be either) – moves that will become more pronounced once the dollar rolls over from the 104 area to resume its downswing.

 

S&P 500 and Nasdaq Outlook

(Click on image to enlarge)

S&P 500 and Nasdaq

5,290 support can be reached in the opening part of today‘s session, but I‘m not looking for a deep dip to follow. JPM, WFC, GS, KRE helping out IWM – there can‘t be a bullish upleg without financials and industrials. Consumer discretionaries with materials are to follow.as much as materials and for weeks touted energy.


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