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It seems like everyone’s making money in the stock market this year. Equities are so green that, unlike in 2022, investors have been able to focus on measuring gains rather than recouping losses.

We can chalk most of this up to traders’ expectations for interest rate cuts from the Federal Reserve.

Today’s top story explores what might happen if that doesn’t pan out. We’re also covering CPI, Janet Yellen in China, and Germany’s real estate slump.

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*At a glance:

• DJIA: 39,233.00, up 0.03%

• S&P 500: 5,253.25, up 0.01%

• Nasdaq Composite: 18,313.25, up 0.06%

• 10-year Treasury yield: 4.448%, up 7 basis points

• Gold: $2,359.70 per ounce, up 0.60%

• Bitcoin: $72,270.00, up 4.35%

• Brent crude: $90.44 a barrel, down 0.80%

*Pre-market data and moves as of 7:00 a.m. EST Monday

‘The greatest policy error of all time’

At the end of last year, markets expected the Fed to cut rates as many as seven times.

That optimism showed up in stocks.

The S&P 500 ended 2023 with a 24% gain, and the momentum carried into the new year — the benchmark index just notched its best first quarter since 2019.

Yet equities have rallied even as expectations for rate cuts have torpedoed.

“Seven cuts were crazily optimistic,” Rhys Williams, chief investment officer at Wayve Capital, told me. “That almost implies you have a recession.”

Meanwhile, Dallas Fed President Lorie Logan said Friday it’s “much too soon” to even think about cuts.

As of today, futures markets suggest the Fed may only lower rates once or twice.

Equities seem to be trading as if the opposite were true.

“The fact that there is a rate cut out there somewhere is enough right now to support markets,” Williams said.

The backdrop to all this is an economy and labor market that still appears robust, despite the Fed’s historic monetary policy tightening cycle.

“The storyline in the first quarter is ‘we don’t need the Fed because the economy is stronger than we thought,’” David Daglio, the chief investment officer of TwinFocus, told me.

The question now is whether the economy keeps humming long enough to justify the returns of the last six months.

Consider:

• Stocks are near all-time highs

• Wall Street expects earnings to improve for a third quarter in a row

• Credit spreads are the narrowest in two decades (meaning it’s easy for companies to borrow cash)

Together, these conditions seem to foreshadow a rate hike, rather than a cut.

Daglio’s worried Powell & Co. could be walking into "the greatest policy error of all time.” Certain pockets of the market seem to agree.

Gold is making records, and commodity prices have climbed for an unusual eight consecutive weeks, which implies some investors are indeed taking chips off the table.

“What we know about markets is that there’s always one thing that everyone believes to be true, that doesn’t end up being true,” Daglio said. “And that breaks the market.”

Elsewhere:

• The March inflation report is due Wednesday. Analysts expect CPI to show a modest slowdown compared to a year ago. (WSJ)

• Janet Yellen is coming back from China. Sources say the Treasury Secretary exchanged gifts with a top official on a cruise during her trip. (FT)

• The return of $100-a-barrel oil? Brent crude has already hit $90, and OPEC is committed to production cuts. Geopolitical tumult may push oil to triple-digits for the first time in nearly two years. (Bloomberg)

Rapid-fire headlines:

• JPMorgan reports earnings Friday (Yahoo Finance)

• Jamie Dimon compared AI to the printing press and computers (CNBC)

• Biden to warn Beijing against meddling in the South China Sea (FT)

• Immigration helps explain why jobs data doesn’t add up (WSJ)

• Germany’s real estate slump has cratered investment deals (Bloomberg)

Last thing:

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