So you’re saying there’s a chance? Market confidence that the Fed is just about done – reinforced by the statistical trappings of a recession in waiting – is combining with an overall decent level of economic activity and companies trying to defend profit margins. All while an under-invested investment community feels some pressure to grab for equity exposure in a stock market showing signs of a potentially meaningful momentum thrust higher. The Wall Street Journal ushers in the Fed public-comment blackout period with an article all but sealing a quarter-point rate hike leading soon thereafter to a wait-and-see stance. The Leading Economic Indicators at 10 a.m. were far weaker than forecast and have now become a loud recession alarm – yet the components dragging them down are survey based (consumer and business expectations) and housing (a known weak point already possibly stabilizing). Perhaps this, along with companies trimming jobs and trying to get ahead of demand slowdowns, is enough to embolden the S & P 500 ‘s upside stab that has taken it right to the longer-term bear-market downtrend line that has thwarted rallies several times, even as in absolute terms the index remains 2% below the December highs. It remains tricky to interpret the market’s macro message given all the January-effect mean-reversion action with discarded growth stocks getting relief and steady defensive sectors being harvested for gains after strong 2022 relative performance. But it’s clear that with GDP for the fourth quarter expected to come in above 2% and the lagged effect of Fed tightening as yet unclear, investors continue to price in a decent chance of a not-so-harsh economic pace for the next several months. Here Goldman Sachs’s rendering of cyclical vs. defensive stocks: The coming rush of earnings reports will probably continue to test this view, given the soft start to the season and some sense that companies want to reset expectations as many shift to cost-cutting mode. Bond yields continue to retrace higher after a ferocious Treasury rally in recent months, which along with firmer oil and copper prices imply the global-growth tone is seen as steadier. Also comes as money has rushed toward bonds by retail investors trying to capture 4-6% safe-ish yields, a rational response, though perhaps in its way also a sign of skeptical sentiment toward equities’ potential to make more headway. My weekend column explored all this. A clear trend this year is the sharp outperformance of non-US stocks. Part of this is the relative lethargy of US mega-cap growth but reopening effects, long-term mean-reversion and lower valuations are also drawing money overseas. The MSCI ACWI World Index Ex-US is ahead of the S & P 500 by four percentage points this month but that comes after a long relative losing streak. Breadth is strong again, not quite a blast-off 90% upside day, but continuing a good run for the majority of stocks. Credit hangs in fine. VIX under 20, benign but hard to see it falling too much in the nine days before the Fed decision but we’ll see.