Core PCE, GDP, Other Inflation Data Set to Move Equities & Bonds This Week

• Inflation remains a significant concern, with PMIs indicating price heat and the labor market showing resilience, suggesting the 'inflation genie' is not yet contained.
• Key economic data this week, including PCE, GDP, and employment reports, are expected to influence Fed policy, with analysts anticipating further rate hikes this year.
• A secular shift is observed towards an inverse correlation between bond yields and stock prices, differing from the 'Great Moderation' era and impacting traditional 60/40 portfolio diversification.
• Market breadth is described as poor, with small caps and equal-weight indices underperforming, indicating that 'rotation is the new momentum trade' and is likely to persist.

Schwab Network analysts discuss the upcoming week's economic data, emphasizing persistent inflation and labor market resilience. They highlight the potential for further Fed rate hikes and a secular shift in bond-stock correlations, suggesting a challenging environment for traditional diversification and continued market rotation due to poor breadth.