This is the daily notebook of Mike Santoli, CNBC’s senior markets commentator, with ideas about trends, stocks and market statistics. The market continues to migrate back toward riskier assets, with the consensus entering 2023 in a defensive posture and ill-prepared for a benign tilt toward inflation data or reassuring signals on corporate results. It’s an overstatement to say the market is sniffing out anything in particular about CPI data due Thursday, but investors are growing more comfortable with the leading indicators of downside momentum in inflation and the chance for a less-threatening Federal Reserve relatively soon. Of course, the action is also taking the S & P 500 up toward a crucial fulcrum level — the 200-day moving average and the entire bear-market downtrend line — just ahead of a key data release and the start of earnings season, as is its habit. Both those hurdles sit near 4,000. The leadership of this recent spurt has been risk-seeking and cyclically oriented — which to some degree can be chalked up to the usual early year mean-reversion trade in which the washed-out losers of one year get a reprieve. Media and busted hypergrowth stocks abound on the year-to-date winners list, and this is probably why. This could simply reflect risk-off positioning being jolted by upticks in prices. The TD Ameritrade retail-trader equity sentiment index hit a record low in December, while professional money has been heavy on cash and light on risk exposures. Things are probably now more balanced into the CPI number, though JPMorgan still sees a 1%-2% S & P 500 rally on a cool print, with roughly equivalent downside on a hot one. Still, high-beta stocks, equal-weight consumer discretionary and industrial baskets are far outpacing defensive groups and the broad market for the past six months, after being smoked in the first half of 2022. Still-low unemployment, still-healthy wage growth, crushed gasoline prices, a spill-back in mortgage rates and no broad signs of consumer stress just yet are supporting recoveries here. It’s become common to argue that the equity market in this way is ignoring the message of the deeply inverted Treasury yield curve, which itself is said to be directly challenging the message and intentions of the Fed. To a degree, yes, but the Treasury market is mostly just saying the Fed is nearly done, inflation is on the retreat and the range of probabilities over the next year must include the chance for rate cuts. Then there’s the fact that the Fed’s rhetoric must remain resolute against inflation until the numbers drop closer to its target, so the fact that the Fed refuses to signal a pivot to rate cuts offers no real signal about whether they might come relatively soon after the final rate hike. Might the Fed choose to push back explicitly against this optimistic market push toward looser financial conditions, which recently has included an awakening of dormant meme stocks? Sure, at some point this could happen. But financial conditions are the Fed’s tool. It’s the market’s job to look ahead to handicap a potential inflection point no matter what the Fed is saying. The recession risk cannot be eliminated; the recession calls can’t be disproved in a timely way. Plausibly, this should cap the market somewhere short of the record highs. The market is not priced for a deep earnings drop, but is not at a terribly demanding valuation threshold if companies and the economy “muddle through.” Market breadth is again pretty strong, and new 52-week highs have been outpacing new lows all week, a shift from rallies seen last year (part of this is moving more than a year beyond the index peaks). Credit markets remain quite firm, a decent support. VIX pretty subdued near 21, not exactly clenched up in fear ahead of key data, though probably will drain lower after CPI and ahead of a three-day weekend.