- 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