29.03.25 - Sell-off continues into weekend after inflation data

The latest inflation numbers published on Friday afternoon came in higher than expected. The core personal consumption expenditures (PCE) price index rose 0.4% in February, above economists' 0.3% forecast. This pushed the 12-month inflation rate to 2.8%, exceeding the projected 2.7%.
At the same time consumer spending increased 0.4%, below the forecast of 0.5%, while the personal saving rate reached 4.6%, its highest since June 2024.

Markets: Markets left the week in deep red zone. The Nasdaq index down on Friday 2.6%, lost another 0.5% more in the after-hours trading; US 10-year yield down to 4.24%, gold with new all-time high at USD 3’086 per ounce. Global stock markets and cryptos joined the sell-off. Cryptos continue today trading lower.

My view: It is not a surprise that latest economic data was not well received. Investors are increasingly concerned about potential stagflation, where inflation remains persistent despite slower economic growth.
If upcoming US data continues to signal stagflation/recession, markets are likely to shift further into defensive positioning and risk-off mode. Let’s do not forget, investors recently added risk by increasing the equity exposure in their portfolio while buying the dip. That new allocation is already in minus.
My current positioning, however, is holding up well. I always maintain a core equity allocation, but I have been scaling back long-term positions gradually since the start of the year. At the same time, my short positions built tactically over that period are now paying off, helping keep my portfolio solidly in the green, despite the broader sell off.

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