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Bad news is good news

Hope is not an investment strategy, but absent other things, it moves the market. Yesterday, the US unemployment was published, and it showed a little uptick to 3.9%. After chairman Powel’s comments on Wednesday where he mentioned that a rise in unemployment could trigger rate cuts, yesterday’s data was enough to put rate cuts back in the table again in another episode of “bad news is good news”. Odds for a rate cut in June and July are below 50%, but September is now above 66%, so as of yesterday, we have a target date for the first cut. Treasury bonds yields went down slightly from the recent peak of 4.73% and equity indices went up. We still have the little problem of inflation above the 2% target, but the focus is now on the other side of the Fed’s dual mandate.

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