The markets are trading just about as anticipated after the banking scare and a fast and large sell-off, but they are recovering nicely. If we had not had the three banks fall into deep trouble, I believe we would be much further along in this uptrend. Pullbacks are buyable as the trend is up. Inflation is starting to roll over, which equals lower volatility and a higher market. This is the most anticipated recession in history; everyone is calling for a recession. It is all the rage, and the probability is that we will fall into a recession. The big question with everyone anticipating a recession is whether it has already been priced in, and we believe the answer is yes. If we do fall into a recession, it will be self-inflicted by the Federal Reserve moving too fast and too far. Inflation does appear to be abating, as it is falling faster than consensus expects. The March CPI and PPI show that the “higher for longer inflation” narrative is not coming true. In fact, the primary reason core CPI has remained high is the real estate rents component of the inflation calculation, which is up 8.1% YoY, while core CPI ex-shelter 3M SAAR is 2.6%, which is within the Fed target of ~2%.

Chart: SPY 200 Day Moving Average

The S&P 500 has been above its 200-week moving average for 25 weeks now, and this is a good indicator of a solid uptrend with very strong odds that the market will continue its upward climb.