The Nasdaq 100 is on track for a double-digit monthly gain, Tesla rose more than 30% in a single week and Cathie Wood’s flagship fund is set for its best month ever.

That tells you pretty much everything you need to know about the state of US capital markets on the eve of what at least some traders suspect might end up being the final Fed hike of the cycle.

There’s no mystery as to what’s driving outsized gains for high-growth, long-duration equities. The dollar is more than 10% off its highs, and US real yields have tumbled dramatically. In other words, financial conditions are easing alongside receding inflation in the developed world, and that’s bolstering last year’s laggards.

I’ve argued the Fed will eventually have to begrudgingly accept this sort of thing, counterproductive as it is with inflation still running miles above target. Policymakers can only repeat the hawkish message so many times. If markets aren’t inclined to believe it, then all the worse for markets if the Committee sticks to its guns and holds terminal through 2023 come hell or shallow recession.

Currently, though, it’s understandable that risk would be on the front foot. Earnings are hit or miss, but with i) Europe dodging an existential energy crisis, and perhaps even sidestepping a recession altogether, ii) high hopes for Chinese growth coming out of the re-opening wave, and iii) inflation continuing to moderate in the US against an economy that’s exhibiting just the “right” amount of consumer weakness in conjunction with a bulletproof labor market, it’s hard to blame investors for being optimistic.

Note that the chase into RoW, and particularly the almost capitulatory rush into European stocks, is indicative of the re-risking mood and a panicky attempt to jump aboard a moving train in the new year.

Emerging market equity and debt funds are enjoying the strongest inflows in two years, while last week’s haul for European equity funds was the largest since the war started.

“Besides the obvious under-positioning dynamic, the key macro inputs behind the renewed re-risking confidence are about a re-pricing lower in left-tails and a re-pricing higher in right-tails,” Nomura’s Charlie McElligott said Friday. He called the Bank of Canada’s surprisingly explicit forward “hold” guidance (which accompanied Wednesday’s 25bps hike) material for the “macro vol compression story.”

“They’re the first major central bank to transition from the prior outsized hikes to now into the final ‘pause and reassess’ phase,” Charlie said, calling that a scenario that’s potentially “in play” for the Fed after next week’s move which, obviously, is locked on 25bps.

If you ask Larry Summers, Jerome Powell shouldn’t necessarily talk up the inevitability of additional hikes after next week. “I don’t think it’s a time to be committing to rate hikes, given the indications of softness that we have seen from a number of quarters,” he told Bloomberg’s David Westin, for this week’s pulse-pounding edition of “Wall Street Week.” “I hope they will not project confidence about what their future intentions are.”

Summers also flagged the recent easing in financial conditions documented above. “In a way, the monetary impulse that’s coming into the economy is much less contractionary than you would think just looking at Fed funds,” he said, calling that something the Fed may want to be concerned about.

For once, Summers’s message wasn’t controversial. The economy is throwing off conflicting signals. Promising additional hikes could be unwise, but so could saying anything that might be conducive to additional dollar weakness, lower yields and even more buoyant equities.

It’s worth noting that McElligott preemptively sketched the contours of the current market and macro conjuncture on several different occasions earlier this year and late last. He reiterated the point on Friday.

“The consensus view is and was ‘recession / trough / bottom in H1,’ before later we then see a ‘Fed easing / market stabilizing and recover[y] in H2’ mindset,” he remarked, before noting that instead, resilient US services, labor and wages have helped “to offset the obvious recession already underway in housing and manufacturing,” while the outlook for global growth is being re-priced for the better “in real-time.”

The takeaway, Charlie said, is that it’s “early in the year where I think we see risk surprise to the upside, holding off the ‘hard landing-istas,’ before you get that come-to-Jesus moment sequenced thereafter.”