sellside observations for the week ahead (Feb 22nd); appears Fed's gonna be lookin' for a 'bigger boat'

Good afternoon and I hope you are enjoying your long weekend … I saw this balloon thing and thought it was worth slowing down to mention,

Magazine cover indicator, as noted by @mark_ungewitter are funTERtaining as,

Magazine covers are often contrarian signals. Why? Because markets are often thoroughly discounted by the time narratives reach saturation, the point of maximum value for enterprising editors.

At the moment, I’m leaning WITH not against the cover idea — the story is HERE for you to make of it whatever you will.

Moving along … HERE are a few observations from Global Wall St inbox … There seems to be more dip buying (at least in thought and on paper — recommendations and narratives) than I would have thought. BMO, BAML, SG, TD to name a few. I was NOT as surprised to see some upward revision TO hike expectations (BAMLs Gapen and CSFB for example) as narratives get marked to market.

From Global Wall Street TO the internet … Here are few other links / things / resources which to consider as you enjoy weekend ahead and then, start planning and plotting your way through the holiday shortened week just ahead …

ZH: Treasury Traders Know Fed Has Missed The Boat On A Bigger Move
Authored by Ven Ram, Bloomberg cross-asset strategist,

On Thursday afternoon, Federal Reserve Bank of Cleveland President Loretta Mester remarked that she saw a compelling case for a bigger increase earlier this month when policymakers met. Not much later in the day, her colleague James Bullard commented that he would not rule out supporting a 50-basis point hike at the March meeting.

Whatever their comments, the Fed’s February move of 25 basis points will remain a missed opportunity to hike more, and it would seem that there is now little chance of reviving such a possibility.

By the middle of January, it was clear from Fed officials’ steer that the monetary authority was only considering a 25-basis point increase - an end-of-season folly that is coming to haunt it two weeks after the decision.

After all, if an overwhelming majority of policymakers have already penciled in a rate of 5.25%, and all economic participants are working on that assumption, why drag your feet without good reason and prolong getting to the destination?

There is little doubt that if the Fed were to have met in the aftermath of January’s non-farm payrolls expansion, resurgent inflation data and stand-out retail sales, it would have probably raised rates by a bigger margin.

[ZH: Inflation swaps signal the market's recent renewed expectation for a rise in CPI...]

But having dialed down the pace, it’s too late for the Fed to accelerate again, for that would:

a) send a message to the markets that policymakers have lost the narrative on inflation;

b) that the Fed is abandoning its avowed goal of a soft landing;

c) that there is no policy coherence; and

d) that the Fed is panicking that inflation is out of control, spurring a negative feedback loop.

None of this is lost on the markets. Even in the wake of comments by both Mester and Bullard - notwithstanding the fact that neither is a voter this year — interest-rate traders see a bigger move next month as just a fractional tail risk.

[ZH: post-Mester/Bullard we have seen only a modest increase to a 12% chance of a 50bps hike in March (conditioned on a 100% chance of a 25bps hike)]

The bout of inflation we have seen in the aftermath of the pandemic is unlikely to settle anytime soon, and prior episodes of resistant price pressures show the Fed has to set its sights higher on its real policy rate. The sooner it gets to higher ground, the less the pain for the economy as a whole.

And so it would seem, the Fed’s gonna be lookin’ for a bigger boat — perhaps the USS Rate HIKE or USS Higher TERMINAL?

Meanwhile, in as far as some OTHER charts and signals from the market, a look at JUNK …

Kimble: Junk Bonds About To Send New Bearish Message To Stocks, Possible Says Joe Friday

… Joe Friday is of the opinion that stock investors should keep a close eye on what JNK does from here! If junk bonds break down, we could see more selling across the stock market. Stay tuned!!

For another somewhat different angle on HY,

McClellan: HY Bond A-D Line Showing Liquidity Problem - Chart In Focus

… The message is that financial market liquidity has suddenly left the building, and that this is going to come around and bite even the big cap stocks which can muscle aside the little guys for a while, like the big pigs at the feeding trough, but eventually it affects them too.  The vulnerable ones are more useful in this respect, showing us that the liquidity is drying up ahead of time.

Completely unrelated but perhaps something of GOOD news in what ever might be perceived as gloom — econ weakness, lower stocks well, may also mean

Kimble: Here’s Why Commodity Prices May Decline Lower Yet!

… Commodities have now declined nearly 20% from roughly one year ago and are testing important near-term price support at (2). If this index breaks below support here it could mean a bigger decline for commodity prices is underway. Stay tuned!

Moving on then TO the holiday shortened week ahead AND for any / all (still)interested in trying to plan your trades and trade your plans in / around FUNduhMENTALs, here are a couple economic calendars and LINKS I used when I was closer to and IN ‘the game’.

First, this from the best in the strategy biz is a LINK thru TO this calendar,

Wells FARGOs version, if you prefer …

… and lets NOT forget EconOday links (among the best available and most useful IMO), GLOBALLY HERE and as far as US domestically (only) HERE …

THAT is all for now. Enjoy whatever is left of YOUR long weekend — I’ve test driven all sorts of vehicles (helping Thing 1) and will be angling to play some wheat hockey tomorrow — they say there’s no bad weather just bad clothing (a take of that old adage, there’s no bad bond just a bad price … or no bad substack, just a bad ‘stacker’??)

Never mind, you get it … enjoy!