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October 6, 2024 Observations

  • Year over year CPI is slated to come in lower which may in fact fall more than the economic consensus if the base effect from last year has not been considered. If month over month CPI and/or Core CPI come in below expectations, the probability of a larger rate cut should rise despite the recent data suggesting a strong labor market.
  • The rise in the dollar is spooking some participants in risk markets. The rise at this stage is largely irrelevant thanks to the global liquidity injections of recent weeks. If the dollar continues to rise above 104, I may grow wary.
  • As broad sentiment reverses toward bullishness, I’d like to see equity prices continue to reach new highs, particularly in the cyclicals. A failure of price to mirror this swing in sentiment would be a red flag.
  • It will be interesting to see if geopolitical tensions in the Middle East continue to escalate. In April of this year we saw an escalation that ultimately led to a brief spike in oil prices followed by a substantial retreat. If Israel’s inevitable response to Iran’s recent attack succeeds in de-escalation, as paradoxical as that sounds, we should see a similar retreat in oil play out.

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JANUARY 12, 2025 OBSERVATIONS

Multiple selloffs in equities following strong jobs and ISM data highlights a general concern of returning inflation at a time when valuations are already quite...
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