A Policy Mistake On The Horizon?

“I can’t confidently say I know the appropriate rate path.”-Jerome Powell.

The March FOMC was all about uncertainty at its highest level since COVID, which Jaypo used as a pretext to be cautious while charting the course of monetary policy.

However, despite the 90-day delay in implementing reciprocal tariffs, and despite the optimism about Chinese-US trade talks in Switzerland, JayPo has once again been non-committal about the trajectory of monetary policy.

Thus, we believe the Fed will likely be late in this cycle, just as it was during the “transitory inflation” one.

On the other hand, Bessent has remarkably failed to deliver on his promise of lower yields, as the bond vigilantes are calling the Trump administration’s bluff of controlling the budget deficit by DOGE cuts and tariffs revenues.

In other central bank action, we also had the BOE cut rates this week as expected.

Portfolio continues to touch ATHs with double-digit performance, beating the benchmark by 200 bps.

PS: Apologies to paid subscribers for not updating chat this week as we were going on vacation and had to face flight delays/cancellations amid an escalating war.

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US!

ISM services was the most important macro data of the week. While the headline number was slightly better than expected, the surprise was that the ISM Prices paid was significantly higher.

Note that we have been writing about the data discrepancy due to the goods' front-loading for weeks.

However, Services prices seems to be out of control (if the trend continues) despite lower oil prices gradually feeding into the economy.

Moving on, one chart we couldn’t share last week, due to ISM Services not being out, was the ISM Manufacturing, and ISM Services was the ISM Employment.

The employment scenario from the ISM data seems stagnant; however, as the continuous claims data has begun rising, we must be watchful of the deterioration in the coming months.

Coming on to the FOMC,