Research.LeutholdGroup

The CPI numbers exceeded the most aggressive market estimates. The bond market’s message is quite clear: the concerns of Fed tightening outweighs inflation. While it’s still debatable whether inflation is “transitory”, the reflation trade still gets the benefit of the doubt. 

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CPI figures for the last two months have pummeled estimates and set multiyear records. Equity and fixed income markets seem to be comfortable in the Fed’s assessment that these high inflation prints are transitory.

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The CPI numbers blew past market expectations. Equity investors might feel it’s too hot, as higher inflation has historically been associated with lower equity valuations.

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The CPI numbers are a tad better than market expectations. Expectations for higher inflation are already quite high and that means simply meeting expectations might not be enough.

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The Core CPI numbers were slightly below estimates easing inflation fears. Inflation in the Energy complex has driven headline inflation to a one year high. Readings over the next few months will be distorted as we reach the anniversary of last spring’s collapse.

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The Core CPI numbers are slightly below consensus. With equities at extreme valuations, having well-contained inflation is not a bad thing at all. Enjoy the “goldilocks” while it lasts.

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The CPI numbers are largely in line with expectations. A blue sweep and a new Fed regime is a powerful combination that should be taken seriously. We now believe the odds of higher inflation are materially better than just a month ago.

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The CPI numbers are slightly ahead of expectations. The reflation trade and the weaker dollar trade are very popular but they are no no-brainers. Our moderate inflation view is supported by the latest reading of our Inflation Scorecard.

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The CPI numbers are slightly below expectations. Positive vaccine news has kept the rotation trade alive. Our moderate inflation view is supported by the latest reading of Inflation Scorecard.

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The CPI numbers are in line with expectations. The inflation impact of a “blue wave” will be much more significant and the markets are already trying to price that in.

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CPI figures beat expectations but inflation remains below desired levels.The Fed’s change to an average inflation target means a higher desired range. Government spending and depressed consumer confidence highlight our Inflation Scorecard.

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The CPI numbers beat expectations again. The reflation theme is supported by a weaker U.S. dollar and lower real yields. Our inflation scorecard is also consistent with a reflation story.

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The non-seasonally adjusted headline CPI rose 0.6% (y/y) in June, a bit stronger than market estimates. The Core CPI maintained its 1.2% annual pace (Chart 1), which is also a tad stronger than the market expectations. There was very little market reaction  to these new numbers since investors have learned to look through these numbers after COVID-19 and the latest numbers are not enough to impact any policy directions in the near term.

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May’s month over month CPI results missed expectations but rebounded from April’s plunge. Deflation is still on the table but several indicators have bounced off their lows. Inflation results are less meaningful as large segments of the Index are inaccessible to consumers.

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The CPI numbers missed expectations. COVID-19 is the divide between inflation winners vs losers. Our inflation scorecard continues to point to lower inflation and it’s driven by a demand shock. Lower capacity utilization and money velocity also indicate a disinflationary trend ahead.

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The CPI numbers missed expectations. The segments most affected by COVID-19 were the biggest detractors. The market isn’t too concerned about weak inflation at this point, because there are much bigger issues at present, such as liquidity and financial conditions.

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February’s “Coronavirus Free” CPI data came in a tick hotter than expected. The massive downdraft in risk assets will be extraordinarily deflationary and we question whether the Fed can ride to the rescue once again.

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Where inflation goes next will be primarily determined by the probability of a recession.

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Headline and Core CPIs both post slower than expected gains in their month-over-month figures. The Fed’s laissez-faire attitude for 2020 seems appropriate for now. Interesting movements in commodity indexes may signal future upward price pressure.

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Wednesday's report contained no datapoints that might sway Fed policy. After three cuts in 2019 and a restart of quantitative easing, a recession that felt almost imminent at the beginning of the year seems to have been avoided.

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