The stock market is struggling to decide on whether it likes rate cuts enough to ignore a weakening economy.
I highlighted earlier that there are 135 bps in cuts priced in over the next year and 155 bps through 2026. That gets rates below 3% and feels like 'peak Fed pricing' or something close. The problem is that removes the 'fed put' beyond that and just leaves you with a softening economy. In addition, there are big risks around tariff inflation that are still marinating that cold result in a nightmare scenario of stagflation.
So the earlier enthusiasm about a more-dovish Fed path is quickly being met by economic and inflation worries. The S&P 500 has turned a 25 point gain into a similar-sized loss.
I also worry that NVDA is a bit of a canary in the AI-coal mine trade and that chart isn't looking pretty after today's 3.8% today.
