SUPPORT: Markets are braced for a stall in US inflation declines, against a nervy backdrop of a banks scare and debt ceiling showdown. Historic inflation days have seen typical 2% S&P 500 moves. But our inflation indicator (see chart) shows near-all price pressures are still easing. Whilst coming May and June figures have easy year-over-year comparables. Continued inflation progress is key to keeping a data-dependent Fed on pause and cutting rates later in the year. A combo of 5% Fed rates, tightening bank lending, and self-inflicted debt ceiling harm is set to speed the long-awaited economic, and price rise, slowdown. This will likely boost volatility but ultimately be positive for a long duration-heavy stock market and our tech and healthcare focus.
CONSENSUS: Is for an end to the string of nine straight headline inflation falls, with price rises seen flat at 5%. Whilst underlying core inflation inches lower to 5.5%. Month-over-month rates are seen at still-worrying 0.4% with briefly higher gasoline prices and lagging housing costs. The Cleveland Fed NOWCast shows the risks are to the upside. But our tracker of 13 coincident and forward-looking indicators is more relaxed. It eased a median 2% the past month, with only two constituents up. Global freight rates inched up to $1,763 per 40ft container after an 83% plunge. And a fourth increase in the NAHB housing index, which is still down 46% from its peak level.
INDICATORS: Our indicator is down 33% vs peak. We track labour and services (Employment and Non-manufacturing prices ISM, JOLTS), housing (Zillow rent, NAHB index), goods (Used cars, Manufacturing ISM prices), commodities (Gasoline, broad commodities), supply chains (supply chain index, container rates), and inflation expectations (Michigan survey, Break-evens).
All data, figures & charts are valid as of 09/05/2023