• 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