The past week has seen equity markets rally on stronger than expected US economic reports (4th quarter GDP, ISM manufacturing index, construction spending) and signs (hope) that oil prices bottomed. The Chinese Premier’s comments to the US Treasury secretary indicating that the government is moving along with difficult reforms rather than an additional currency devaluation also helped reduce volatility. All of this is now pushing expectations of the next Fed rate hike; the futures market now has a 41% possibility for this year compared to 17% one month ago. Inflation: CPI rose 2.2% annually in the January report – above the Fed’s target. But the Fed prefers to watch the PCE (Personal Consumption Expenditures) which stands at 1.4%. Of course both reports exclude food and energy. The 10 year T is 1.83%. Stay Tuned. David R. Pascale, Jr.
