The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Hot CPI
Futures were flat and yields were unchanged when CPI ex food and energy (3.3% vs 3.1% est and 3.2% prior) changed everything. Other CPI metrics were hot as well. The hopes of Fed rate cuts are going bye bye and the fear that inflation isn’t actually defeated, sprouted out of the market’s consciousness. S&P futures fell 60 handles immediately and yields climbed 10 bips immediately. The index opened -65 and started to recover immediately. The index went back and forth a few times before the afternoon and was almost unch’d by 1 PM. The index slipped back a bit late. Capital flow was a touch elevated at 104%.
Bond investors are taking this hotter inflation print seriously but stock investors are dismissing it. It is not clear why there is a difference.
Bonds are anticipating a future without Fed cuts and maybe even hikes, if inflation doesn’t return to the disinflationary path.
Stocks are anticipating no significant changes going forward. Equities act as if this print is a one-off blip that will resolve itself in the next few inflation releases.
Which market is right? Is the truth in between?
I think a prudent individual would agree that the properly discounted future is somewhere in between… and that bodes poorly for stocks right now, especially knee-jerk dip-buyers.
PPI releases tomorrow. It *should* reinforce what CPI just showed us, but we’ll only know for sure at 8:30 AM.
See you tomorrow.
-Mike
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