Operating at the Intersection of Technology and the Capital Markets
Tag: CPI
CPI figures are due Thursday morning. CPI is a blunt tool at best. We have written on a number of occasions as to why we are not fans of the Government-reported CPI data. To summarize why we dislike the CPI measure: CPI is not a comprehensive measure of price inflation. Much of the price inflation … Continue reading CPI Data Quality Is Low
The ICE BofA High Yield Index stood at 9.5% at week's end (measured daily), whereas CPI (a monthly measure) stood at 8.2% as of September. Therefore, investors enjoy 130 basis points (the delta between the High Yield Index and the CPI) of positive real yield. The fact that positive real yield exists in the High … Continue reading High Yield Bonds Offer A Positive Real Yield
We continue to expect the Fed to raise its Fed Funds Rate by 75 BPS in early November. Core inflation was up 0.6% month-to-month (6.6%) for the year. Shelter was the primary driver of Core Inflation as it carried a 32.5% relative weighting and was up 0.7% month-to-month. Food was up 0.8% month-to-month and has … Continue reading With Core Inflation Up The Fed Won’t Change Its Path
Could the NASDAQ re-test the COVID lows of March 2020 when it sat around 6,900? Yes. That would require a prolonged recession (which we expect) AND The Fed not restarting its ultra-dovish monetary policy of Quantitative Easing combined with a near zero Fed Funds Rate. Who knows how the Fed will behave in 2H 2023 … Continue reading The NASDAQ Could Re-Test COVID Lows & The Rise of High Yield
August Core CPI was 6.30%, ahead of the Cleveland Fed's 6.25% estimate (table below), and up from July's 5.90% print. Headline CPI was 8.30%, down from July's 8.50% print given oil's retreat, but ahead of the Cleveland Fed's 8.24% estimate. Our view is that with Core CPI at 6.30%, the Fed will likely raise by … Continue reading Core CPI Runs Hot. Yields To Move Higher.
Today's chart represents the difference between the Fed Funds Rate less the year-over-year change in the CPI plotted monthly. The difference between the Fed Funds Rate and the year-over-year change in the CPI is almost as negative (and therefore accommodative) as it has ever been. The Fed has its work cut out in its battle … Continue reading Fed Funds Rate – CPI = Accommodative Policy
The Fed will look to Core CPI next week - not the Headline CPI number - to assess the level of its next rate tightening move. We have advocated for a 100 BPS increase should Core CPI grow versus last month as the Fed Funds Rate remains accommodative and the markets need to be shocked … Continue reading Forget Headline CPI. Focus On Core.
We believe there is a 50% probability that the Fed will raise its Fed Funds target range by 100 basis points when the FOMC meets on September 20th and 21st. 50% probability of a 100 basis point increase, 40% probability of a 75 basis point increase, 10% probability of a 50 basis point increase. July … Continue reading 50 vs. 75 vs. 100 BPS
The 2-Year Treasury yield sits at approximately 3.42%. Therefore the Fed ought to raise the Fed Funds Rate by 100 bps which would put the Fed Funds Rate lower and upper bound at 3.25-3.50%. The next FOMC meeting will be held September 20th and 21st. Simultaneously, the Fed ought to stick to its plan of … Continue reading Powell Should Raise By 100 Basis Points
The Fed's motto ought to be "too little, too late", because that is the reality. To use the words "hawkish" and "Fed" in the same sentence is laughable. If we were to play this inconsequential short-term game of a 50 vs. a 75 basis point hike in September we would guess 75 basis points. Core … Continue reading 75 BPS in September If We Were To Guess
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