Inflation is growing: CPI=7,5% with 0,2% over estimate - Stocks Down - Risk Off

Inflation is growing: CPI=7,5% with 0,2% over estimate - Stocks Down - Risk Off

Inflation is growing: CPI=7,5% with 0,2% over estimate - Stocks Down - Risk Off

Yesterday was a special day for trading markets because of rising in CPI. Stocks were up with over 2% percent at the start of the US session but reversed sharply with over 5%. Inflation surprised markets expectations but more interesting was FED Bullard (a voter in monetary Policy's) reaction to CPI:

He sees a 100-basis point increase by July 1.

50 BPs in March but will defer to Powell.

Would favour changing rates between meetings.

FED balance sheet reduction may require asset sales.

What is in CPI to justify the reaction above?!

Highest reading in 40 years

m/m CPI 0.6% vs 0.5%

Real weekly earnings -0.5% vs +0.1%

Core inflation:

  • Ex food and energy +6.0% vs +5.9% y/y expected
  • Prior ex food and energy +5.5%
  • Core m/m +0.6% vs +0.5% exp
  • Prior core m/m +0.6%

  1. Housing +0.7%
  2. Owners rent +0.4%
  3. Food +0.9%
  4. Energy +0.9%
  5. Gasoline -0.8%
  6. Medical care +0.6%
  7. Apparel +1.1%
  8. Services +0.4%

Only Ice scream is 👇

You can read detailed report here 

What are the reasons for these readings?

First Supply chain bottlenecks because Covid outbreak and accelerated economic growing from 2015 just look at SPX500

Citi Bank now sees 50 basis point Fed

What will happen from here?

I'm expecting inflation to peak in April-May and rates to go near to 4% in the future. Are we at the starting point of a depression?!

We intend to grow up our exposure on Gold & defensive stocks.

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