A four-week global equity rally faltered this week amid concerns around delayed Fed cuts.

MSCI’s gauge was on track for its first weekly loss in five. It was no coincidence that the dollar was poised for its best stretch in nearly two months (admittedly not a big move, though).

US twos were 4.73% on May 15. They were 4.92% headed into Friday’s session. Based on that alone you could’ve guessed equities were off the highs.

Chris Waller was due to speak about the neutral rate in Reykjavík Friday. His remarks had the potential to move markets ahead of a long holiday weekend for US traders.

Chris’s star-gazing aside (i.e., regardless of whether the headlines from Iceland are dovish, hawkish or — ahem — neutral), the overarching message from Fed officials (Waller included) is that rate cuts are a relatively distant prospect.

This week’s sparse data releases, including and especially Thursday’s US PMIs and a below-consensus initial claims print for NFP survey week, underscored that message, prompting traders to dial back rate-cut pricing.

Between the data, the Fed speak and a set of hawkish FOMC minutes, the feel good vibes from a run of underwhelming top-tier releases earlier this month (remember: We’re in a bad news is good news regime currently) are gone for the time being.

This is a bit maddening to the extent it’s bedeviled trades predicated on the eventual realization of “long and variable lags.” These “lags” are very, very long, and as Raphael Bostic acknowledged this week, the refi opportunity afforded households and corporates in 2020 and 2021 means the US economy’s sensitivity to higher policy rates “is going to be a lot less,” as he put it, adding that “this [may] last a lot longer than you might expect.” Again: These lags are long indeed.

As a consequence, playing for the steepener continues to be a frustrating experience. “Rates continue to chop people up, where everybody’s favorite steepener bleed[s] more bodies with Fed cuts continuing to get pushed out as data softens but remains ‘good enough’ and generally expansive,” Nomura’s Charlie McElligott said Friday.

Depending on whether you count a brief inversion in April of 2022, we’ve either passed the two-year anniversary of the 2s10s inversion or we’re coming up on it. Either way, it feels like the forever inversion.

“The trade on the multi-year Fed cutting cycle view [may be] fully reflected in the price already, hence the trade seemingly won’t work until growth slows in a much more powerful fashion,” McElligott went on.

“It’s not wasted on us that a flatter curve remains the pain trade as the bull steepener remains the most ‘logical’ next phase of the rate cycle,” BMO’s Ian Lyngen and Vail Hartman remarked. “There’s no question it remains too soon for the cyclical trend to emerge with any conviction.”