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The US labour market remains extraordinarily strong. That, together with inflation around a forty-year high, is putting significant pressure on the Fed to reduce the level of monetary accommodation quickly. Initial jobless claims in the latest week were just 166K – the joint lowest (with the week ending March 19) since November 1968. This statistic is all the more striking given that the US labour force is around twice as large as it was in 1968. There is a growing likelihood that the Fed may tighten rates by 50bps at its meeting on 4 May, and it is likely to begin the process of winding down its balance sheet. This process, often referred to as quantitative tightening, looks set to occur at a faster pace than previously thought. Against the backdrop of Fed policy tightening and Russia’s invasion of Ukraine, Fathom is currently cautious on risky assets.
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