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THIS IS AN INTRADAY ALERT FOR CLIENTS OF FUNDSTRAT ONLY
Today’s CPI was a major downside read coming in at:
- Nov CPI
- Headline CPI +0.1% vs Street 0.3%
- Core CPI 0.2% vs Street 0.3%
- Details show that the downside “soft” Nov CPI repeatable
- Last month, our analysis showed “soft” Oct CPI was repeatable, and it was
Look below, the trend is obvious:
- Food is slowing 2 months in a row
- Energy tanking, matching the roundtrip in oil, diesel and gasoline and even natural gas
- Used cars falling -36% rate
- Shelter slowing visibly and now matching the tanking of market-based measures of home prices and rents
- Medical care services is falling at -40% rate and repeatable due to annual adjustment (see our other CPI reports)
- 1M annualized core CPI now 2.4% vs 3.6% last month
- 3M annualized core inflation is now down to 4.18% (was 5.56% last month)
- Do we think Fed still needs to be banging away with +75bp hikes? Nope
- 2-yr yields down 19bp to 4.17%, the lowest since Sept
- If Fed raises +50bp in Dec 14, Fed funds will be 4.33%
- 2Y less Fed Funds by end of this week will be BELOW ZERO
- Market saying Fed might be DONE after December
- Thus, we see support for YE rally
- This is a dovish surprise and argues for a dovish change in Fed reaction function
Big picture — inflation is slowinig and falling like a rock
Look below and see the big picture?
- inflation CPI and PPI are falling like a rock
That is because the inflation drivers are tanking and falling like a rock
- this argues Fed has less pressure to raise
