What Happened

  • Core PCE inflation eased more than expected.
  • Month-end rebalancing drove bond buying and pushed yields lower.
  • Equities rebounded while the dollar slipped.
  • Gold firmed as real yields dipped.

What It Means

  • Softer inflation tempers the Fed’s hawkish tone from earlier in the week.
  • Lower yields provide relief to growth and high-duration assets.
  • Month-end flows can exaggerate moves but still signal demand for duration.

What I Think

  • This is a constructive reset after the Fed shock.
  • If inflation continues to cool, the market can rebuild a cut narrative.
  • I remain selective and want confirmation from February data.

Market Terms

  • Core PCE - The Fed’s preferred inflation gauge excluding food and energy.
  • Month-end rebalance - Portfolio adjustments at the end of the month.
  • Real yields - Nominal yields adjusted for inflation expectations.