PPI up 0.3% month-to-month as food inflation remains sticky. In case you missed this morning's PPI release, click HERE. Foods. With respect to "Foods", it is no surprise that poultry, eggs and dairy were up in November as this was reflected at Retail. Apparently there is a bird flu that was driving poultry/egg prices higher. … Continue reading PPI: Food Prices Remain Elevated
There was essentially no movement on the Fed's Balance Sheet this week with only very minor changes. Total Treasury and Agency security holdings were reduced by $1.9 billion for the week-ended December 7th 2022. Fed Balance Sheet – Treasuries: The Fed’s Treasury security holdings were $1.9 billion lower over the last week and $61.9 billion lower … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
Governments gorged on historically low interest rates since 2009 and issued record amounts of debt to fund all sorts of silly spending programs from economic "stimulus" checks to QE. Debt securities are subject to the laws of supply and demand as is any commodity. We have too much paper outstanding - especially as it relates … Continue reading More QE Is Coming. Stagflation Is Staying.
Prices need to fall across the economy to really kickstart economic growth to the point where Americans can feel it. Unfortunately this is not going to happen. Prices and interest rates will plateau, yet they will remain elevated as the economy stalls. We have a word for this economic condition - Stagflation. If you regularly … Continue reading Prices Need To Decline To Kickstart Real GDP Growth. Don’t Hold Your Breath.
Many Technology investors got religion on August 26th as it relates to interest rate increases (more to come) and a Fed pivot (not any time soon). The message of "higher for longer" was reiterated yesterday by Fed Chair Powell. The Fed tends to undershoot when it comes to inflation and its Fed Funds target. We … Continue reading It Always Makes Sense To Invest In Quality Names
If the Fed raises by 100 BPS tomorrow we believe there is another 10% downside to the NASDAQ before October earnings. We believe the NASDAQ will continue to work lower as the Fed hikes its Fed Funds Rate and as Treasury yields climb. We expect the Fed's rate hiking will stop by early next year … Continue reading A NASDAQ Bottom. QT Or Not To QT?
We have updated our Fed Funds Rate increase probabilities from our previous note on September 5th: 100 BPS increase: New probability: 75%; Old probability: 50%;75 BPS increase: New probability: 25%; Old probability: 40%;50 BPS increase: New probability: 0%; Old probability: 10%. The FOMC meets on September 20th and 21st.
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.
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.
Despite hawkish rhetoric the Federal Reserve's monetary policy remains accommodative. Real interest rates remain negative by a wide margin (8.50% CPI compared to a 2.25-2.50% Fed Funds Rate range) and we are nowhere near a "neutral" rate. Our outlook calls for muted Real GDP growth and high prices (i.e. Stagflation) for years to come. Commodities … Continue reading The Fed Remains Accommodative. Inflation Remains Persistent.