Market based probability for rate cuts to begin in March is inconsistent with the prevailing soft-landing narrative.

The rotation out of mega-cap Tech and into YTD underperformers will likely continue for the next couple of weeks. In index terms, this would favor the Russell 2000 (RTY) over the Nasdaq 100 (NDX).

Momentum reversal at year-end, known as the January Effect, is one of the most consistent patterns in Equity Markets.

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Without preemptive rate cuts, the Fed's commitment to higher for longer rates will eventually lead to large scale layoffs.

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Yesterday’s dovish Fed comments, small uptick in consumer confidence and better-than-feared early holiday shopping trends has started early rotation into cyclical equity groups like banks, REITS, autos and housing.

The prevailing soft landing narrative includes expectations for 100bp of rate cuts in ’24. The presumed rate cuts have been driving recent dollar weakness and gold strength.

A US soft-landing in 2024 is the prevailing narrative with risks skewed toward a potential recession.

Inside Markets will not be published for the rest of the week. The next edition will be published Monday, November 27.

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This afternoon’s earnings report from NVDA will have near-term implications for semis, mega-cap Tech and the broader market.

The SPX advanced +2.2% last week, while the NDX gained 2.0% and Russell 2000 (RTY) +5.4%. The cooler inflation print increased conviction that the Fed is done with its hiking cycle.