Stock Market Nerd Macro – January 13, 2024
Inflation Data:
- Consumer Inflation expectations fell from 3.4% last report to 3.0%.
- The Consumer Price Index (CPI) for December rose 0.3% M/M for December. This compares to 0.2% expected and 0.1% last month.
- The Core CPI for December rose 0.3% M/M as expected. This compares to 0.3% last month.
- The CPI for December rose 3.4% Y/Y. This compares to 3.2% expected and 3.1% last month.
- The Core CPI for December rose 3.9% Y/Y. This compares to 3.8% expected and 4.0% last month.
- The Producer Price Index (PPI) for December rose 0% M/M. This compares to 0.2% expected and 0% growth last month.
- The PPI for December rose by -0.1% M/M. This compares to 0.1% expected and -0.1% last month.
One hot M/M CPI print does little to change my view that the fed is done hiking and that multiple cuts are coming this year. Betting markets currently see 175 bps of cuts. I don’t know if that will play out, but the point is that policy will get easier in 2024. That is, unless inflation sharply re-ramps. I don’t see that happening. Real-time rent inflation indicators point to sharp disinflation and the Fed’s time-lagged indicators haven’t yet reflected that. Shelter is 35% of the CPI. Furthermore, high inflation months will readily roll off in the coming months to offer a strong disinflation tailwind in Y/Y comps. The PPI also continues to be ice cold: producer prices are a leading indicator for consumer prices. Finally, more and more companies are citing disinflation for their input costs in their Q3 earnings reports and Q4/2024 outlooks. Whether that’s freight, fuel, chicken etc. it’s a consistent theme. Disinflation won’t be linear, but it is clearly playing out and I still expect us to get close to the Fed’s 2% target in 2024. Policy will ease in tandem if that happens like I think it will.
Employment Data:
- Initial jobless claims were 202,000 vs. 210,000 expected.
