We’ve maintained economic data needs to cooperate (deteriorate) for a bottom to form, otherwise the Fed will continue to tighten. We’ve been focusing on the NY Fed’s weekly economic index (WEI) because it’s a well-built, high frequency measure of demand. Today, it dropped to 1.8% on broad-based weakness. This week is the first time the indicator has fallen below 2% since COVID. It is somewhat volatile (a ‘normal’ 1-week change is 0.5pp) but it would be important if the indicator keeps moving lower/doesn’t rebound.
If economic data is rolling over, long 10yr (short yields) is interesting. The 10yr is up +68bps over the last month and +14bps today, 99th percentile increases. Yields should decline as real economic growth estimates drop. We’re watching the next WEI readings for confirmation of weakness in demand.
