Good News, Bad News.

1.) GOOD NEWS – The macro reacceleration theme remains intact... Global PMIs (Purchasing Manager’s Index) continued to strengthen in February, with the share of global manufacturing PMIs in expansion territory now at 85%, and the global composite PMI is at its strongest in almost two years.

2.) BAD NEWS – Thanks to the reacceleration in the price of oil, inflation is likely to follow. So, as we can see in the Fed Funds Futures market, the number of rate cuts priced in for 2026 has now fallen below one cut. Additional not-so-great news on the rates front can be seen in bond volatility (MOVE Index), which was up +21.25% yesterday to 95.30. That’s a big jump. There is resistance for volatility at 105, but for context, bond volatility got up to 137 last April. Short term, we likely get a drop in the 2YR, 10YR-30YR yields towards support, but I wouldn’t expect them to fall back to bearish trends given this likely reacceleration in inflation. That can also keep the value of the US Dollar (DXY) Index moving higher. That index is slightly above 100 right now. A sustained hold above that could put some more pressure on stocks. Remember, uncertainty makes demand for dollars go up, and dollar up tends to put some pressure on stocks in the short term.

3.) GOOD NEWS – The cost of protection is near the most expensive levels in history. How is that “good news”? It creates a premium in implied volatility, which suggests that, regardless of price, protection is being bought. The S&P 500 proxy, SPY, is currently trading with a 99% implied volatility premium. That protection creates a decent hedge that tends to put a floor under prices. Right now, that “floor” is around $660 for SPY. It closed at $666.06 yesterday. If you look at the chart below, you can see that when protection gets this expensive (red line going down), markets are often close to resolving the correction.