Markets Did a 180‑Degree Turn Last Week
It was a roller‑coaster for investors with a mix of surprises that sent the financial world into a little frenzy.
- Volatility on the rise again – the markets were jittery as a fresh wave of numbers hit the wire.
- Hotter‑than‑expected US CPI – inflation snuck up, making everyone think the Fed might tighten things further.
- Geopolitical bumps – tensions out on the global stage added another layer of uncertainty.
- Other twists and turns – for the rest of us, the usual “stuff that just pops up” kept the scene lively.
In short, investors were scrambling for safe haven. The results? The U.S. dollar cheered out the best week it’s had since September ’22, stock indices took a nosedive again, and gold surged to new record highs, proving everyone liked the shiny safe‑haven buzzkill.
What to Keep an Eye on Next Week
With the data calendar a bit lighter, the spotlight turns to:
- New geopolitical developments – any fresh flashpoint could shift the mood again.
- Quarter‑1 corporate earnings – companies are dropping numbers, and they’ll either reinforce or deflate the current vibe.
Time will tell if the turbulence eases or picks up again. Investors, strap in – it’s a marathon, not a sprint!
The week that was – Themes
Inflation’s Sticky Dance: What the Numbers Are Telling Us
Last week’s market chatter wasn’t all about geopolitics; it was the inflation story that stole the show. The March US CPI came out hotter than a Florida summer, nudging the headline price index up 3.5% year‑over‑year—three straight months above what economists expected, and a step higher than the 3.2% from March. The culprit? Energy prices, especially gasoline, which did a little wheel‑spin right up into the index.
Core Numbers: Not So Core After All
When you strip out food and energy, the core CPI still climbed 3.8% YoY, matching February’s pace. And the “supercore” gauge—core services without housing costs—shot up to a whopping 4.8% YoY, the highest in an 11‑month stretch. On a month‑on‑month basis, both headline and core measures ticked up 0.4%, unchanged from February.
What the Annualised Figures Mean
Annualising the data gives us a clearer look at the underlying trend: a 4.6% headline CPI rate and a 4.5% core rate over the last three months. Those numbers are the biggest since late 2022 and mid‑2023, respectively. Bottom line? Inflation is stickier than a hyper‑glue bar, and the de‑inflation road is more bumpy than the Autobahn.
When “Noise” Turns Into a Trend
The highs in January and February were once dismissed as noise, but now it’s hard to argue that the overheating isn’t a solid trend. The PPI—price producer index—was a tad softer, climbing 2.1% YoY versus a 2.2% consensus, but that still beats the 1.6% seen in February. Meanwhile, services inflation hit a wall and goods prices have flipped into a deflationary story. With geopolitical tensions on the rise, goods prices might head back up, risking a re‑acceleration of headline inflation.
The Fed’s Countdown: Is a Rate Cut Still on the Table?
Some folks are now wondering if the Federal Reserve should even be daydreaming about cuts. The data might not give the “confidence” the committee seeks to hit a 2% target. In the meantime, the market’s getting ready to put “higher for longer” on the schedule, pushing the first cut to September (only 25 bp) and trimming the 2024 easing to under 50 bp. That’s a sharper hawk compared to last week’s 65 bp and the whopping 150 bp cuts poised for this year.
Euro & ECB: A Contrasting Tale
Across the Atlantic, the ECB is heading toward a different path. The Governing Council didn’t lock in a June cut at the March meeting, but it’s now set to start easing at the next meeting. President Lagarde hinted there’s more to learn before the next policy talk, and most council members want to wait until June before rolling the scissors. If the ECB slides into a cut this week, it would save them from a risky rate hike at a time of fragile recovery and faster‑than‑expected inflation fade.
What This Means for the Euro
With the Fed staying tighter and the ECB moving dovish, the euro’s likely to keep being nudged down against the dollar. So keep an eye on EUR/USD—expect a slow grind.
Other Central Banks: Canada, NZ and the Dollar’s Advantage
The Bank of Canada and the Reserve Bank of New Zealand gave us the usual, but there are subtle hints of movement. The BoC said it’s watching inflation and wonders if the dip in core numbers is just a blip, even dropping the 2024 CPI forecast to 2.6% and hinting at a possible cut in early summer. Meanwhile, the RBNZ reiterated that it feels the risks they’re looking at haven’t changed, sticking to a restrictive stance.
All in all, the Fed may remain the outlier, cutting only after the rest of the G10 starts easing. That defensive stance is propelling the dollar higher against its peers, and any drops in the dollar will probably be gentle.
The week that was – Markets
Dollar’s Road to the Top: Fed, Firewalls, and a Trio of Global Tensions
Last week the US dollar decided to play kingmaker. The Dollar Index (DXY) surged nearly 1.75 % over five trading days, marking its best one‑week climb since September 2022. It even touched new year‑to‑date highs, proving that confidence in the Fed’s ‘hawkish’ stance still reigns supreme.
Prompted by Policy, Policed by Warnings
The meeting of hawkish expectations and a spike in geopolitical jitters—first seen on Friday’s trading—boosted safe‑haven demand for the buck. Big global currencies took a hit:
- GBP slipped below 1.25, shocking many traders.
- JPY hit a new 34‑year low.
- EUR fell beneath 1.07.
- AUD let go of the .65 threshold.
Fire and Fury: From Israeli Strikes to Iranian Aggression
After an alleged Israeli strike on senior Iranian military commanders deep in Syria, frantic chatter erupted on Friday. Reports suggested Iran could launch a retaliatory attack “within days.” This speculation was short‑lived; on Saturday, Iran indeed fired drones and missiles towards Israel, later saying on the United Nations that the “matter can be concluded.”
This rapid news cycle created a classic risk‑aversion spike over the weekend. Traders pulled out, focusing on capital preservation, wary of a potential market gap when the weekend markets reopened.
Gold, Crude, and Treasuries: The Market’s Quick‑Fix Reactions
Gold jumped to over $2,400/oz, breaking a record for the first time. Yet, by the end of the day, the price crumbled back to its starting level—a boom, then a bust within hours. Though the rally hasn’t ended, one can’t ignore the impact of volatile geopolitics on the bull market.
Similarly, Brent and WTI crude shot up to new highs since October but retraced most of those gains. Still, Brent stayed above the $90/barrel mark for the second consecutive week.
In the Treasury sphere, the curve saw an overall rally; 2‑year yields climbed roughly 15 bp over the past five days, reflecting the Fed’s hawk‑like tenor and a flattening curve.
Equities: The Double‑Edged Sword of Strategy and Reality
Q1 earnings opened rough, with banks like JPMorgan and Wells Fargo missing net‑interest income targets, hinting that the favorable impact of higher rates might be waning. Yet, Citigroup showed resilience.
The S&P 500 fell more than 1.5 % for the first time in a month, hitting a two‑week streak of losses. The tech‑heavy Nasdaq 100 dipped around 0.65 %, closing in on its worst four‑month run since August of the previous year.
But even amid these setbacks, the consensus is that equities will still find a higher path of least resistance. Buying opportunities might arise near the 50‑day moving average for the S&P 500—a level barely touched since November.
Fed Policy: The “Fed Put” Still In Play and Its Cool Winter Outlook
The March CPI may have disappointed policymakers, but the next Fed moves still lean toward rate cuts. Some forecasts place the first cut as late as June, July, or September. The key point: higher inflation will elongate the duration of the Fed’s terminal rate rather than force new hikes.
There’s also a rejuvenated “Fed put” in play—so the FOMC is ready to dive in with aggressive cuts or targeted liquidity if macro‑conditions worsen. Powell and his crew are firmly backing the market.
While sharp pullbacks—or even deeper corrections—can’t be ruled out, a medium‑term outlook favors gains. An encouraging policy backdrop coupled with solid economic growth and still‑robust earnings keeps the market poised for another climb.
The week ahead
Set Your Sights on the Near-Future: Politics, Numbers, and Market Grit
Geopolitical gossip will drive the market pulse this week, especially reactions to any flare‑up in the Middle East. A spike in tension usually sends investors boarding the safe‑haven train—think of the old playbook that flashed to life last Friday afternoon.
Economic Highlights – UK, G10, and US in Focus
- UK: The Data Roller‑Coaster –
- Job numbers drop to 4.0% unemployment in the span up to February.
- Earnings slow down, with regular pay up only 5.5% YoY (a touch below previous forecasts).
- Inflation: CPI climbs to 3.1% YoY, slightly cooler than February; core inflation eases to 4.1% YoY from 4.5%.
- Goal 2% inflation target in spring looks within reach.
- Canada, Japan, New Zealand –
- Canadian inflation is on the radar after Governor Macklem hinted at a June rate cut.
- Japan’s CPI is expected to rise, but less sharply than anticipated.
- New Zealand continues a steady march on inflation.
- Australia & China –
- Australia’s latest jobs report should reveal about +10,000 new roles in March, but unemployment will tick up to 3.9%.
- China’s industrial output and retail data point to a 4.8% YoY GDP growth in Q1, a smoother ride than last year’s 5.2% pace.
- United States: Retail & Fed Talks –
- Retail sales jump 0.4% MoM in March, a reminder of the country’s “exceptional” growth amid global slowing.
- Fed Chair Powell and fourteen other policymakers are set to speak this week.
Earnings Fever: Wall Street’s Countdown
On a quieter earnings cheat sheet, 44 S&P 500 names—including six Dow staples—are slated to disclose results this week.
- Financials:
- Goldman Sachs (Mon) and Morgan Stanley (Tues) will break down their banking numbers.
- Bank of America’s second‑quarter update (Tues) follows suit.
- Healthcare & Media:
- UnitedHealth (Tues) faces scrutiny as the Dow’s biggest player.
- Netflix (Live update after Thursday) keeps streaming in the spotlight.
What to Expect – A Quick Takeaway
Geopolitical chatter will likely drag market attention to the sidelines for a moment, but dividends from the middle ground look healthy. Equities keep lifting, while the dollar nips upward when policy paths diverge. The next few weeks should offer a clean path toward a steady climb.
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