The markets final week absolutely behaved as if a consequential shift was afoot, with a number of the trendiest trades falling rapidly out of favor, months’ price of bond-market bets unwound in days and the trusty rotational dance amongst kinds of shares not sufficient to rescue the tape from a 2% drop.
There have been some stark modifications — in perceptions about Federal Reserve intentions, pricing of inflation threat and positioning throughout asset courses. However how a lot is really completely different now in regards to the Fed coverage path, the elemental backdrop and the tactical set-up, in a market caught offside and susceptible, as ever, to short-term overshoots?
The week began with hedge-fund luminary Paul Tudor Jones saying traders ought to “go all in on the inflation trades” if the Fed confirmed nonchalance about latest stout inflation knowledge. The remainder of the week noticed the markets act as if too many have been already loaded up with these inflation trades, and after Fed officers confirmed barely extra concern about inflation than anticipated, these trades blew up spectacularly.