From time to time, I like to assess what I got right and wrong. It’s been my strongest year ever YTD, even bigger in absolute terms than any full year, but with many ups and downs. As a highly competitive person, I always move on quickly from trades I nailed, but feel there are trades I could have done better and try to focus on them. I will list a couple a bit later in this note.
First, in terms of overall views, I have been stating that if we continue with nominal GDP around 6%, and Core CPI prints 0.3% as it has averaged for 18 months, they would have to hike by year end as 18 months of being on hold has not achieved the sufficient restraint needed. The data is adding up that this is becoming less likely, so what does that mean? Basically it means the data is moving in the direction the Fed wants. We had a weaker CPI report, and activity data has softened notably. Q1 GDP was 5.5% nominal, and we may see lower than that in Q2. That is exactly what the Fed was hoping to achieve by being on hold for longer, so it inches them closer to cuts.