Good Monday AM,

I hope you had a fantastic weekend.

There is not a lot of data out there today, but this is a busy week.

Tomorrow brings the jolts report and IS non-manufacturing (both will move the market). Wednesday is ADP payroll, nonfarm productivity and until labor costs. Those will impact the market as will the Bank of Canada rate decision (especially if they were to cut).. Thursday is unemployment claims (market mover) and Friday brings the biggest data of the month, the BLS jobs report which will move markets. Right now, bonds are consolidating a bit with the 10-yr backing up to 4.29% (we need to close no higher than 4.26% to keep us clearly in the downward rate channel).

I don’t see anyone thinking the Fed will hike rates again at next week’s meeting (or in this current economic cycle) however the concern is when will the Fed start to cut. The data this week will drive that sentiment. Lots of expectations through last week that rate cuts would start in Q1. Mr. Powell did his best to throw water on that idea, so now markets are watching the data. Will be an interesting week for sure. If we can end the week at the level we started, I see that as a win. Of course, anything better would be great but when I share it’s never a straight line up or down, this is exactly what I mean. As I type this today, I would lock and float down on any improvement.

An interesting piece from the WSJ… The only real reason for price deflation is back because spending is slowing.

Goods Deflation Is Back. It Could Speed Inflation’s Return to 2%.

After a historic run-up in inflation, Americans are now starting to see something they haven’t in three years: deflation. To be sure, deflation—that is, falling prices—is largely confined to appliances, furniture, used cars and other goods. Economywide deflation, when prices of most goods and services continuously fall, isn’t in the cards. But economists say goods prices likely have further to fall, which will ease inflation’s return to the Federal Reserve’s 2% target, perhaps as early as the second half of next year.

Prices for long-lasting items, known as durable goods, have fallen on a year-over-year basis for five straight months. The prices of services such as home rental and car insurance continue to climb, albeit at a slowing pace.

Please remain safe and stay healthy, make today great!