The Upshot: Schrödinger’s soft landing still intact despite wobbles. It’s a Fed skip not a Fed pause.
We got our 10y yield forecast wrong: 10y yield surged after the Fed rate cuts and a string of hot jobs and inflation prints and stocks have been wobbly as a result over Christmas. But, the continuation of the disinflationary factors we identified remains intact (further shelter disinflation anchored by slowing wage growth) and was validated in the latest inflation print.
While the broader stock market indices have erased their post-election gains, a few of our central thematic baskets (AI, Trump trade etc) have held onto their post-election gains and notched new ATHs, suggesting the unique macro environment in which key investment themes may dominate traditional macro forces incl higher rates.