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Fed officials try to manage expectations, diplomatic push on Ukraine intensifies, and oil market focus turns to OPEC+.Not so fast There are [View in browser]( [Bloomberg]( Fed officials try to manage expectations, diplomatic push on Ukraine intensifies, and oil market focus turns to OPEC+. Not so fast  There are signs that some Federal Reserve policy makers think that markets may be getting ahead of themselves with the [projected pace of rate hikes](. Four officials spoke yesterday, each emphasizing the need for [gradual tightening]( and the need for moves to be data-dependent. Kansas City Fed President Esther George, a policy voter this year, said “unexpected adjustments” are in nobody’s interest while San Francisco Fed chief Mary Daly emphasized the need not to be disruptive. The [dollar weakened]( and Treasury yields dropped as markets reacted to the reduced chances of a “[shock and awe](” hike next month. Meetings Diplomatic maneuvers over Ukraine are [stepping up a gear today]( with Russian President Vladimir Putin meeting his closest European ally Hungarian leader Viktor Orban while U.K. Prime Minister Boris Johnson and Netherlands Prime Minister Mark Rutte are also both expected in Ukraine to meet with its president. U.S. Secretary of State Antony Blinken will [speak by phone]( with Russian Foreign Minister Sergei Lavrov following U.S. proposals on de-escalating the situation. Russia still denies it plans an invasion, while western allies are [finalizing a package of sanctions]( that could be imposed in case diplomatic efforts fail. Crude After posting the [strongest January in decades](, focus for the oil market is turning to tomorrow’s OPEC+ meeting. Goldman Sachs Group Inc. say the outcome of the discussions is “[evenly balanced](” between a 400,000 barrels per day production increase and a much bigger hike. With several analysts [predicting $100 crude this year](, producer nations are coming under increasing pressure to lift supplies. OPEC and its allies, however, are already facing their own problems in [meeting the supply goals]( set at the monthly gathering. A barrel of international benchmark Brent crude was trading little changed at [$88.60 at 5:50 a.m. Eastern Time](, with WTI edging lower amid fears for production in Texas as the region [faces freezing weather](. Markets mixed Yesterday’ strong rally in tech shares and policy makers comments trying to quell the most hawkish outlooks is helping calm markets. In a [very quiet Asian session]( due to the Lunar New Year holiday, Japan’s Topix index closed unchanged. In Europe, the Stoxx 600 Index was 1% in a broad-based rally helped by strong [financial sector earnings](. S&P 500 futures pointed to a [small move lower at the open](, the 10-year Treasury yield was at 1.763% and gold was above $1,800 an ounce. Coming up... Canadian GDP for November is at 8:30 a.m. January U.S. ISM Manufacturing is at 10:00 a.m. with December JOLTS job openings data and constructing spending also at that time. Auto sales numbers for January are released today. It is a big day for tech earnings with Alphabet Inc., Advanced Micro Devices Inc., MicroStrategy Inc. and PayPal Holdings Inc. all reporting. Starbucks Corp., Exxon Mobil Corp. and General Motors Co. also release results. What we've been reading Here's what caught our eye over the last 24 hours. - Some companies [like recessions and unemployment](, business owner explains. - Europe is losing nuclear power just when it [really needs energy](. - The 60/40 portfolio has [worst loss since March 2020]( on Fed shift. - Sacklers, states near bigger Purdue Pharma [opioid settlement](. - Stock market [chaos revved up]( by options dealers rushing to hedge. - Investors face race to the bottom as [bond terms ditch safeguards](. - Earth has [more tree species]( than we thought. And finally, here’s what Joe’s interested in this morning Stocks are riding a nice two-day bounce here. But nonetheless, the basic workhorse 60/40 portfolio had a rough month, [turning in its worst performance since March 2020](. That March was quite a month of course, with stocks getting clobbered in historic fashion due to the onset of the pandemic. And Treasuries didn't catch their normal safe-haven bid, due to liquidity issues. This January was really different, as the main source of angst seemed to be rising inflation, and the Fed's hawkish pivot. Nonetheless, it does speak to the inflation risk for investors. [As I wrote about yesterday](, investors in normal portfolios have done beautifully over the last several decades in portfolios that thrive in quasi-goldilocks of mild or falling inflation and rates that just go lower and lower. Sure, we get selloffs sometimes, but in the short term they're balanced out by the flight to Treasuries. And in the long term, both stocks and Treasuries have gone up together. 60/40 has been a win win. Long term gain and mitigated short term pain. Whenever you hear about some strategist offering up an alternative to the standard 60/40 portfolio, it's usually uncompelling. Sometimes they advocate moving some of the Treasuries to credit. Ok, that might juice your returns in the short term, but it also increases the drawdown risks, as credit doesn't have the same safe haven properties in a crash. Or maybe they advocate for some international exposure (which takes on currency risk). Or maybe the 60 part should be weighted more to value or something (but how great is the track record with that? Not very). All these ideas are fine, so far as they go, but they don't really solve any problems if we were to get a new macro regime. So again, for investors, the stakes are high that the Fed is, in fact, able to bring down inflation in some manner, and not continually chase behind it. In a recent note to clients, [Tim Duy of SGH Macro](, warned clients that historically, the only way that elevated inflation really turned lower in the past [was to induce a recession](. It seems safe to stay that both scenarios -- an aggressive Fed inflation chase that results in more months like January or a recession brought on by the Fed doing everything it takes to crush inflation -- aren't seen as likely scenarios by the market. Follow Bloomberg's Joe Weisenthal on Twitter [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. Follow Us Before it’s here, it’s on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals can’t find anywhere else. [Learn more](. 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