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  1. Home
  2. / Markets

Are We Now in the Fifth Stage of Rate-Hike Grief?

Lots of other things will drive markets as we end earnings season, and the Fed seems largely priced in.
By PETER TCHIR
Feb 24, 2023 | 11:39 AM EST

The Kubler-Ross stages of grief often seems to apply as much to markets as to people.

Denial: No way will the Fed hike that much! No way will they jeopardize the economy, or even stocks. The Fed put is alive and well!

Anger: This is insane! What is Powell thinking! Jackson Hole is when you present policy not take $&*^^ potshots at the market!

Bargaining: If they just pivot, we can rally this!

Depression: This sucks! The Fed is holding us back.

Acceptance: OK, inflation didn't improve as much as we thought and is ticking back higher, but so what? The Fed is near the end no matter what. The Fed is data dependent here. If the data stays as is, we can absorb a few hikes easily.

Thursday's trading felt like "acceptance."

-- GDP and Consumption revised down.

-- Inflation revised significantly higher.

-- Jobless claims very low.

Treasuries responded by yields going higher, but stocks held their own.

After a weak, by most measures, 7-Year Treasury auction, Treasuries rebounded too.

The day wasn't without its scary moments, though, as the S&P broke below 3980 (the 50-day moving average), but it regained that. Yes, there were a lot of 1% intraday swings but we bounced. Thank 0DTE options for accentuating those swings, and maybe even signaling direction as the 0DTE day started with puts and calls roughly mixed and then saw calls take a definitive lead around lunch time.

We are down Friday after a higher-than-expected set of PCE inflation readings, but if we really are following stages of "Rate-Hike Grief," markets should respond well to the number over the course of the day.

Lots of other things will drive markets as we end earnings season, and the Fed seems largely priced in.

Questions about the state of the economy will take precedence (there are threads out there supporting the weak economy theory, even though they've lost ground of late).

China asking Russia to pursue peace (on one hand), while allegedly gearing up to sell Russia military equipment, could also swing markets.

I'm bullish on bonds and stocks here (more bullish bonds than stocks, but comfortable owning both).

I will be keeping a closer eye on technicals than usual, as that and 0DTE, along with some possible month-end rebalancing out of stocks into bonds, seems the current "tail" risk.

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TAGS: Bonds | Economic Data | Federal Reserve | Interest Rates | Markets | Treasury Bonds | U.S. Equity

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Sep 25, 2023 11:15 AM EDT

It's hard to ignore.

Despite Current 'Vortex of Pain,' History Suggests Markets Could Rally in Q4

Tom Lee and the FSI Team
Sep 25, 2023 8:58 AM EDT

We remain constructive through year-end as inflation remains key and, we believe, on a glidepath lower.

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