The service sector is the driving force of the U.S. economy, so it will have a greater impact on inflation dynamics, which is why the Fed cares more about services inflation over goods inflation.

Particularly given the base effects that will be caused by tariffs, in a vacuum.

With services inflation continuing to cool down (aka "disinflation"), the Fed has no choice but to look at recent inflation data and feel an increasing sense of confidence about cutting rates.

Not this upcoming meeting (March).

Probably not in the next meeting (May).

But I could definitely foresee a cut in June, given that we'll have three more rounds of CPI data for them to make a decision at that meeting.

If the overall trend of disinflation continues, which I expect, then the Fed will have a clear justification to cut by 0.25% and probably to announce a modest tapering in their QT program.

I don't believe that QE is coming.

I don't believe that a recession is coming.

I don't believe that a monetary bazooka is coming.

But on net, we've entered a monetary policy environment that is oriented towards less tightening and an actual reduction in interest rates, which is (and has been) accretive to asset prices.

So long as the economy stays resilient (though, not perfect), then this overall environment should continue to uphold the trend in asset prices (stocks & BTC, in particular).

That doesn't mean that corrections can't happen.

In fact, corrections are a normal part of uptrends.

By definition, the opportunity to produce a higher low is one-half of the uptrend (with a higher high being the second-half).

Right now, I think inflation dynamics are shaping up in a positive way, but that labor market conditions are going to stay in the center stage in terms of importance.

The resilient & dynamic nature of the economy is going to be the real test for the market going forward.

If that stays intact, along with the disinflationary environment, then we're not even going to have to say "we're so back", because the reality is we never left.

Cheers fam.

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