Did you know that the concept of “sideline cash” refers to money that investors have available to invest but choose to hold back in anticipation of market corrections or opportunities?

This fact underscores the need for patience in the stock market, waiting for the right moment to present itself.

In this issue, the following highlights will be our focus:

• The Market Is Wobbling, Should We Worry: First, we’ll look at the resilience of the market amidst investor optimism 😱

• Maybe The Worry Is Overdone: Next, we’ll discuss the uneven path back to lower inflation, recommending patience 🤔

• The Worry Is Indeed Overdone: Finally, we’ll highlight cash reserves and the Federal Reserve’s strategy, offering reassurance about market stability 😌

Dive into today’s analyses for a grounded perspective when navigating today’s financial waters.

The Market Is Wobbling, Should We Worry? 😱

There are three possible explanations for the market’s resilience.

First, investors could be delusional, as often happens amid an equity bubble 🥴

Those who make this argument believe that eventually reality will hit us in the face, and we should prepare for a painful fall 📉

Maybe The Worry Is Overdone 🤔

A second possibility:

The two high inflation prints in January and February are not all that surprising, considering that we are still in the process of unwinding many price distortions associated with a protracted period of high inflation.

The path back down to 2% inflation was never going to be a straight line, but instead it’s full of zigs and zags, but better news is likely to come in the spring and summer months.

Investors understand that it will be a bumpy process, and they are willing to be patient and not hit the panic button 🚨

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The Worry Is Indeed Overdone 😌

A third possible explanation for the market’s tolerance for the uncomfortably high inflation numbers:

There is lots of cash on the sidelines waiting for any sell-off to jump in, and this cash prevents selloffs from extending too far.

The real explanation is some combination of two and three 🔍

Nevertheless, the Fed should and will hold the line and not cut rates until we see more convincing evidence that inflation is trending back down.

The economy and the financial markets will be just fine as the Fed waits 📈

Inner Circle Macro Update 🔍

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