• The January CPI report exceeded forecasts, indicating a bumpy path toward the Fed’s 2% target.



  • Food price gains intensified.



  • Core inflation accelerated.



  • The core goods CPI declined. Below are some examples.
    • – Used cars:
    • – Apparel:
    • – Medications:
  • Core services CPI climbed at the fastest pace since 2022, …



  • … propelled by shelter inflation, particularly owners’ equivalent rent (OER).



  • Medical care services CPI accelerated.



  • Auto insurance costs were up almost 21% year-over-year.



  • Water and sewage maintenance CPI soared.



  • Expectations for Fed rate cuts were scaled back substantially after the CPI report.



  • A full rate cut was removed from market expectations for 2024 on Tuesday, aligning more closely with the FOMC’s dot-plot.



  • Below are some additional market reactions to the January inflation data.
    • Treasury yields:



  • Equities:



  • The dollar:



  • Gold:



US Economy


  • The market continues to scale back Fed rate cut expectations for 2024.



  • Companies in consumer sectors increasingly mention “weak demand.”



  • The equity market is positioned for stronger economic activity this year.



Market Data


  • It’s been a while since we had a 2% decline in the S&P 500.



  • The last time the S&P 500 was up 14 out of 15 weeks was in 1972.



  • For the Nasdaq Composite, it was in 1997.



  • Data center chip spending:


Source: @financialtimes   Read full article


  • Confidence in US institutions:


Source: Eurasia Group   Read full article



  • US obesity rates:



  • Global investors are increasingly bullish, …


Source: BofA Global Research

  • … drawing down their cash positions.



  • The S&P 500 typically rises during election years, especially if the incumbent party wins.



  • As measured by the Cumulative Advance-Decline Line, the breadth of the Nasdaq Composite has remained depressed even as the index surged in recent months.



  • Time it would take to absorb current CRE vacancies and under-construction inventory:


Source: Morgan Stanley Research; @AyeshaTariq


  • Here is a look at crude oil production by country.



  • The S&P 500’s outperformance relative to the average stock in the index has reached extreme levels.



Great Quotes


“Whether you think you can or think you cannot, you are right.” – Henry Ford


Picture of the Week


Sperm Whale pod, Dominica




All content is the opinion of Brian Decker